By Ray Birch
CHICAGO—The Illinois CU League and America’s Credit Unions are jointly working on a supplemental brief for the U.S. District Court here that will hopefully lead to credit unions being included in a preliminary injunction that pauses implementation of the Illinois Interchange Fee Prohibition Act (IFPA).
However, some credit union leaders are wondering how CUs got left out in the first place.
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.
As CUToday.info reported, a federal judge recently ordered a preliminary injunction that would pause implementation of the IFPA.
The preliminary injunction pauses enforcement of the Illinois state law restricting interchange fees for national banks and federal savings associations, but left the law in place 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.
More Information
While the judge granted the injunction for banks and savings associations, the court requested more information related to the Federal Credit Union Act.
Ashley Sharp, legislative council for the Illinois Credit Union League, told CUToday.info the league and ACU filed “a very strong complaint and motion for preliminary injunction. While we did not anticipate the need for additional information to ensure the applicability of the preliminary injunction to credit unions, we appreciate the opportunity to clarify this issue. We look forward to submitting a supplemental brief by January 15 to ensure credit unions are covered by the preliminary injunction. We feel confident that our supplemental brief will resolve that matter favorably for credit unions.”
Sharp insisted Judge Kendall’s conclusion for federally chartered banks has the same applicability for credit unions.
“We've just got some further points to clarify in the supplemental brief,” she said. “The judge, essentially, asked for more information on clarifying the ability to challenge preemption under the Federal Credit Union Act. We believe the preemption challenge is the same for federal credit unions as it is for national banks. So, we believe that eventually the court will come to the same conclusion for federal credit unions, and apply the motion for preliminary injunction to credit unions.”
Carrie Hunt
America’s Credit Unions Chief Advocacy Officer Carrie Hunt reiterated the initial brief was strong.
Federal Preemption
“Certainly, in our briefing we took the position that credit unions were exempt due to federal preemption,” Hunt told CUToday.info. “The challenge is there is tons of case law relative to preemption on the banking side, relative to the National Bank Act, in part due to a recent Supreme Court case, but also due to the fact the OCC has been really proactive relative to preemption. We are happy the court has asked for additional briefing. We'll certainly look to use all of the tools in our toolbox to try to get the result that we think we need for credit unions.”
Yet some CU leaders are not pleased with the initial decision by Judge Kendall, stating on the condition of anonymity they are uncertain why credit unions were left out in the first place following the briefing filed by ACU and the Illinois League, asking if more could have been done by credit unions prior to the recent decision.
Jason Stverak
“I don't think there's anything we could have done differently, and to anticipate or foresee this particular wrinkle,” Sharp said. “It's what I would describe as a small hiccup in the process. Thankfully, the court has provided us the opportunity to issue a supplemental briefing that'll be due by Jan. 15. I think that will resolve any points of confusion and ensure federal credit unions are included in the preliminary injunction.”
The Defense Credit Union Council offered its perspective.
“Like many others, we are perplexed how the judge arrived at this decision to exclude credit unions,” said DCUC Chief Advocacy Officer Jason Stverak. “We hope the judge’s questions are answered and credit unions are included in the updated ruling. Excluding credit unions would create a payments system nightmare. It is unfair to create a separate system for banks and credit unions.
"Recognizing the need to keep credit unions on par with banks and to create the strongest argument in support of the credit union position, DCUC urged the NCUA to weigh in with the court in concert with the OCC in October 2024, Continued Stverak. "DCUC will continue to advocate on behalf of policies and decisions that provide the greatest protection for credit unions to serve their membership."