WASHINGTON— A top federal banking regulator has now formally joined the banking industry’s push to block Illinois’ controversial swipe-fee law, with the Office of the Comptroller of the Currency urging the Seventh Circuit to reverse a lower-court ruling that largely allowed the state’s Interchange Fee Prohibition Act (IFPA) to stand, according to Law360.
The OCC argued the district court focused too narrowly on who technically sets interchange fees and failed to account for the broader effect the law would have on federally authorized banking powers.
As CUToday.info recently reported, the Illinois law bars banks, credit unions and card networks from charging or receiving interchange fees on the sales-tax and gratuity portions of card transactions. In a Feb. 10 split decision, U.S. District Judge Virginia Kendall largely upheld that core fee restriction while permanently blocking the law’s separate data-usage limits, which she found were preempted as applied to national banks, federal savings associations, federal credit unions and certain out-of-state state banks. The interchange-fee ban remains scheduled to take effect July 1.
The appeal is being led by America’s Credit Unions, Illinois Bankers Association, American Bankers Association, and the Illinois Credit Union League, all of which argue the IFPA unlawfully interferes with how federally regulated institutions are compensated for card services and would impose what they have described as “staggering” compliance burdens. America’s Credit Unions said in a March 9 filing that the law “significantly interferes with federal powers in multiple ways,” including by restricting how financial institutions receive compensation for providing banking services.
“We appreciate the strong support for our legal challenge to the Illinois Interchange Fee Prohibition Act in the amicus briefs filed Friday from a number of important stakeholders in the case. Most notably, we welcome the OCC's conclusion that this misguided state law is clearly preempted by federal law, and the court should halt its implementation,” said Ben Jackson, EVP, Illinois Bankers Association, and Ashley Sharp, SVP, Illinois Credit Union League, in a joint statement.
The Seventh Circuit has already agreed to fast-track the case, with plaintiffs asking for a ruling by mid-June ahead of the July 1 effective date. According to court filings and industry summaries, the consolidated appeal and cross-appeal will determine whether federal banking laws—including the National Bank Act and other federal statutes—preempt the Illinois law’s core interchange-fee restriction, a question that could shape whether similar state-level swipe-fee laws spread nationally, Law360 noted.
Merchants, meanwhile, continue to hail the ruling as a model for other states, with the Merchants Payments Coalition calling the February decision a “major victory” for businesses and consumers. But for credit unions and banks, the case remains one of the most consequential payments battles of 2026, with the outcome likely to determine not only whether Illinois’ first-in-the-nation tax-and-tip carveout survives, but whether other states try to replicate it.