Merchant groups sue OCC and NCUA over Illinois interchange fee law preemption

A coalition of nine merchant trade associations filed two lawsuits against the Office of the Comptroller of the Currency (OCC) and the National Credit Union Administration (NCUA), contesting the agencies' preemption of the Illinois Interchange Fee Prohibition Act (IFPA), ABA Banking Journal reported.

The IFPA, enacted in Illinois, aimed to prohibit banks and payment networks from charging interchange fees on the tax or gratuity portion of debit or credit card transactions. Since 2024, banking groups including the American Bankers Association and Illinois Bankers Association have challenged the state law in court.

In June, a federal district court issued a permanent injunction blocking enforcement of IFPA on most banks after the OCC issued an interim final rule affirming federal authority to allow certain fees. The NCUA followed with a similar rule asserting federal preemption of IFPA, and the court later extended the injunction to federal credit unions.

The banking associations expressed disappointment at the merchants' lawsuits, stating that federal law governs federally chartered banks and credit unions and that the OCC and NCUA acted to uphold federal supremacy over state regulations like IFPA. They emphasized the importance of preventing conflicting state rules that could disrupt the national payment system and economy.