Opposing briefs filed on interchange law.
In June 2024, the Illinois Interchange Fee Prohibition Act (IFPA) was signed into law. It prohibits the collection of interchange fees on sales taxes, excise taxes, and tips if a merchant separates those charges from the price of a purchase. The act also prohibits banks and other entities from using transaction data for purposes other than processing a transaction, except as required by law.
In August, the American Bankers Association (ABA), America’s Credit Unions, the Illinois Banker Association, and the Illinois Credit Union League filed a suit seeking an injunction, arguing that the law will disrupt the payment system, and that it interferes with the federal government’s regulatory authority over federally chartered financial institutions.
In October, both the Office of the Comptroller of the Currency (OCC) and the Illinois Attorney General filed briefs with the court.
The OCC’s amicus brief in support of the banking associations 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. It also asserts that state-level restrictions, such as the IFPA, could fragment the nationwide payments system, undermining its ability to function effectively. Furthermore, the brief says the act would impose substantial operational burdens on national banks that will likely be passed on to consumers in the form of higher fees, reduced services, and weakened fraud protection.
Shortly after the OCC filed its brief, the Illinois Attorney General filed a combined memorandum opposing the banking association’s motion for a preliminary injunction and supporting his motion to dismiss. 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 injunctive relief. The Attorney General also contends that the plaintiffs have not shown that their members will suffer irreparable harm.
For more information on the litigation see this article from Consumer Financial Services Law Monitor.
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