WASHINGTON— The Trump Administration is moving to block the Illinois’ swipe-fee law from applying to national banks, adding a major new federal preemption twist to the industry’s already fast-tracked Seventh Circuit appeal and potentially strengthening the broader fight being waged by banks and credit unions against the state’s Interchange Fee Prohibition Act (IFPA).
Bloomberg Law first reported the move, saying the Office of the Comptroller of the Currency on Tuesday filed an interim final rule with the White House that would preempt Illinois’ law for national banks as the appeal continues.
The development comes just two months after CUToday.info reported that Chief U.S. District Judge Virginia M. Kendall largely upheld the core of the IFPA—allowing Illinois to bar interchange on the tax and gratuity portions of card transactions—while striking down the law’s separate data-usage restriction on preemption grounds. In that Feb. 10 ruling, Kendall declined to extend federal preemption to federal credit unions, leaving CUs exposed to the interchange restrictions absent relief from the appellate court.
In February America’s Credit Unions, the Illinois Credit Union League and the other plaintiffs filed an appeal with the U.S Court of Appeals for the Seventh Circuit. The IFPA is scheduled to become effective July 1, and would ban financial institutions, including credit unions, 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.
CUToday.info reached out to NCUA, asking if the agency will take similar action to protect credit unions.
The Defense Credit Union Council responded.
“While we’re seeing the Office of the Comptroller of the Currency take decisive action to provide regulatory clarity and protect the integrity of the payments system, credit unions deserve the same level of consideration from the National Credit Union Administration,” DCUC Chief Advocacy Officer Jason Stverak told CUToday.info. “The NCUA should evaluate whether it has similar authorities to ensure that a patchwork of state-level interchange policies does not disrupt credit unions’ ability to serve their members especially servicemembers and their families who rely on stable, efficient payment systems. Parity in regulatory treatment isn’t just appropriate, it’s necessary to maintain fairness and consistency across the financial services landscape.”
DCUC also moved immediately Thursday morning, sending a letter to NCUA Chairman Kyle Hauptman, urging the agency to determine, as promptly as practicable, whether it possesses authority comparable to that being asserted by the Office of the Comptroller of the Currency with respect to the Illinois Interchange Fee Prohibition Act.
America's Credit Unions supported the OCC's action.
“As plaintiffs in the lawsuit challenging the IFPA, America's Credit Unions is confident that federal law preempts such state action," stated Scott Simpson, America's Credit Unions president/CEO. "We are pleased to see that the OCC is continuing its efforts to clarify this through a rulemaking to protect financial institutions and consumers from the harmful effects of this misguided Illinois law and any other state efforts that would undermine the safety and stability of the payments system. We are confident the NCUA will continue its leadership in protecting the industry from an unnecessary and burdensome patchwork of laws."