Bank and credit union groups challenge Illinois law restricting interchange fees

The American Bankers Association (ABA), along with the Illinois Bankers Association, America’s Credit Unions and the Illinois Credit Union League filed a complaint in the U.S. District Court for the Northern District of Illinois to challenge the Illinois Interchange Fee Prohibition Act (IFPA). Signed into law on June 7, the IFPA prohibits banks, payment networks and other entities in Illinois from charging or collecting interchange fees on the portion of debit or credit card transactions related to taxes or gratuities.

In the lawsuit, the ABA and its co-plaintiffs argue that the IFPA, if enforced, would disrupt the modern payment system and diminish the benefits that credit and debit cards provide to consumers and businesses. They claim the law conflicts with multiple federal statutes, including the National Bank Act and the Federal Credit Union Act, making it unenforceable against national and state-chartered banks, savings institutions, credit unions, and their service providers. The plaintiffs intend to seek a preliminary injunction to prevent the law’s implementation while the case is adjudicated.

“We’re joining together in this legal challenge to protect Illinois consumers, small businesses and the financial institutions that serve them from the unprecedented chaos and confusion this new state law would create,” said Rob Nichols, ABA president and CEO. “We also joined this lawsuit to strongly defend the dual banking system President Lincoln created in 1863 that has served our nation so well. The IFPA clearly violates the National Bank Act, which gives the federal government specific authority over national banks, as well as a long list of other federal laws designed to protect our financial system. We can’t let that stand.”

Read more on the complaint here.