CHICAGO—A federal judge Friday ordered a preliminary injunction that would pause implementation of the Illinois Interchange Fee Prohibition Act (IFPA).
The IFPA, which was signed into law on June 7, would ban banks, payment networks and other entities from charging or receiving interchange fees in Illinois on the portion of a debit or credit card transaction attributable to tax or gratuity.
The controversial law has been challenged in a complaint filed in August by America’s Credit Unions, the Illinois Credit Union League and the American Bankers Association in U.S. District Court for the Northern District of Illinois.
The judge’s preliminary injunction pauses enforcement of the Illinois state law restricting interchange fees for national banks and federal savings associations, but left the law in effect for Illinois-chartered institutions and credit card networks for now. The order also leaves the law in effect for out-of-state banks and federal credit unions until the court can review the legal arguments in more detail, ABA Banking Journal reported.
CUs Not Included
While the judge granted the injunction for banks and savings associations, the court requested more information related to the Federal Credit Union Act.
America’s Credit Unions said it is working to respond to the questions raised by the court and ensure credit unions ultimately obtain relief from this law.
In her order, Judge Virginia Kendall agreed the federal law preempted state law when it came to national banks and federal savings associations. However, Kendall reserved judgement on the question of federal preemption for out-of-state-chartered institutions and other institutions pending a supplemental briefing on the matter from the plaintiffs. The judge ordered a briefing of no more than 10 pages on the subject to be delivered by Jan. 15, with the state having until Jan. 22 to submit a response of equal length, ABA Banking Journal said.
The American Bankers Association, Illinois Bankers Association, America’s Credit Unions and the Illinois Credit Union League issued a joint statement, saying, "We welcome today's U.S. District Court ruling pausing implementation of the Illinois Interchange Fee Prohibition Act for national banks and federal savings associations. The injunction means that many Illinois consumers will be spared the chaos this law threatens to inflict on our modern payments system until the case can be heard, and that the court recognizes our 'demonstrated likelihood of success' on the merits of our National Bank Act claims. We look forward to answering the judge's questions to ensure that this relief applies to all financial institutions involved in the Illinois payment system, so the customers they serve will also be protected from the harm IFPA will cause if it is allowed to move forward."