On October 2, the Office of the Comptroller of the Currency (OCC) filed an amicus brief in the U.S. District Court for the Northern District of Illinois in support of several banking associations’ motion for a preliminary injunction against the Illinois Interchange Fee Prohibition Act (IFPA). The IFPA, signed into law in June 2024, prohibits credit or debit card issuers and any other entities involved in processing electronic payments from charging an interchange fee on the tax or gratuity portions of a transaction. Additionally, the Act, which is set to take effect in July 2025, restricts banks and other entities from using transaction data for purposes other than processing the transaction, except as required by law. Several banking associations quickly challenged the Act, seeking a preliminary injunction to prevent its implementation. They argue that the IFPA is preempted by federal law, unconstitutional, and invalid.
The OCC’s Brief:
The OCC’s amicus brief argues that the IFPA’s restrictions on interchange fees and data usage significantly interfere with national banks’ federally authorized powers under the National Bank Act (NBA). Specifically, the OCC contends that the IFPA’s prohibition on charging interchange fees on tax and gratuity portions of transactions, as well as its limitations on the use of transaction data, would impose substantial operational burdens on national banks. “If the interchange fee prohibition provision in the IFPA is not invalidated, it will erode this essential infrastructure, leaving national banks with extraordinary operational burdens that likely will be passed on to consumers in the form of higher fees, reduced services, and weakened fraud protection.”
The OCC emphasized that such state-level restrictions could fragment the nationwide payments system, undermining the uniformity necessary for its smooth and effective functioning. The brief argues that the IFPA’s provisions would likely lead to a patchwork of state laws. “If the IFPA is not enjoined and invalidated, it may well trigger a domino effect of other states and localities enacting similar laws, thereby creating a fractured, highly inefficient, and unworkable payment system that would materially affect interstate commerce. The result would be an unmanageable patchwork of state laws that undermine the uniformity necessary for the smooth and effective functioning of the national payment system.”
The OCC urged the court to declare the Act preempted and invalid to maintain the integrity and efficiency of the national payments system.
Illinois Attorney General’s Opposition:
Two days later, the Illinois Attorney General filed a combined memorandum in opposition to the banking associations’ motion for a preliminary injunction and in support of his motion to dismiss. The Attorney General argues that the associations’ motion should be denied and the complaint dismissed on the grounds of sovereign immunity and lack of Article III standing. Specifically, the Attorney General argues that the IFPA is not preempted by any federal statute and that the plaintiffs have failed to establish the necessary elements for preliminary relief.
The Attorney General’s memorandum asserts that the plaintiffs have not demonstrated that the Attorney General will have any authority to enforce the limitation on interchange fees, thus posing insurmountable hurdles of sovereign immunity and Article III standing. “[T]o maintain their challenge to the Interchange Fee Prohibition, plaintiffs must at least identify the Attorney General’s authority to enforce this specific statutory provision. As they seem to concede, however, the statute itself is no help. Although it provides that a person who ‘violates Section 150-10 [the Interchange Fee Prohibition] is subject to a civil penalty of $1,000 per electronic payment transaction,’ it does not specify who is authorized to seek this penalty.”
Additionally, the memorandum argues that the plaintiffs’ claims are unlikely to succeed on the merits, as their view of NBA preemption was rejected by the Supreme Court earlier this year. As discussed here, this spring the Supreme Court found that “not all state laws that limit federal banking powers are preempted,” only those that “prevent[] or significantly interfere[] with the national bank’s exercise of its powers.” Thus, according to the Attorney General, “state laws are not preempted by the National Bank Act unless they interfere with a national bank’s exercise of its powers to an extreme degree,” which, in his opinion, is not the case for the IFPA.
The Attorney General also contends that the plaintiffs have not shown that their members will suffer irreparable harm in the absence of an injunction, especially given the fact that the law is not scheduled to take effect for another nine months.
We will continue to monitor this litigation and provide updates.
