Court Enjoins Enforcement of IL Interchange Fee Law Against Federal Credit Unions

A federal court in Illinois enjoined the state from enforcing a law prohibiting certain interchange fees against federal credit unions.

In 2024, the state of Illinois passed a law which prohibited all parties involved in processing credit card transactions from charging merchants interchange fees on any charges for state and local sales taxes and tips.  After significant litigation had occurred, the OCC issued a ruling finding that the law was preempted by the National Bank Act with respect to federally-charted banks. In turn, the federal court concluded that the law must be enjoined as to such banks (see prior coverage here).  The NCUA also issued a similar rulemaking finding that the law was preempted as to federal credit unions (see prior coverage here).

The court has now concluded that for the same reasons as with national banks, the Illinois law must be enjoined as to federal credit unions.  The NCUA’s rulemaking made clear that the NCUA has exclusive authority over federal credit unions’ ability to charge non-interest charges and fees.  In turn, this preempts state laws purporting to limit federal credit unions from imposing such non-interest charges and fees, which includes the Illinois interchange fee prohibition at issue.