Credit Unions Push Back Against Illinois Swipe Fee Case

Credit union groups are continuing their campaign against an Illinois interchange fees law.

A federal judge in February upheld the Illinois Interchange Fee Prohibition Act (IFPA), siding with the state’s Attorney General Kwame Raoul over financial services groups.

Raoul last week filed a reply brief that seeks to uphold part of the court’s decision that sided with the state, while reversing another part that sided with the financial services industry.

Now, America’s Credit Unions and Illinois Credit Union League say they will file their own response by April 17, calling Raoul’s reply a “deliberately narrow reading of federal preemption doctrines, particularly under the National Bank Act and Federal Credit Union Act” in a news release Monday (April 6).

The release added that the brief argues that even if the interchange fee provision is preempted by financial institutions, that preemption should not be applied to payment card networks.

“This is a significant move because, in practice, interchange fees are set and enforced by these networks rather than financial institutions themselves,” the release added. “If accepted, this distinction could allow states to regulate key aspects of the payments system indirectly, even where direct regulation of financial institutions would be preempted.”

The IFPA, which is scheduled to go into effect in July, prevents banks and credit card companies from instituting interchange fees — otherwise known as “swipe fees” — on the sales tax and tip portions of credit and debit card transactions.

The court ruling in February rejected the plaintiffs’ case that federal banking law supersedes the IFPA, finding that interchange fees are established by card networks rather than banks, and thus do not conflict with federal banking oversight.

“The payment card networks built this ecosystem, and the payment card networks set these fees,” Judge Virginia Kendall wrote.

But the judge did side with the plaintiffs by permanently enjoining the law’s separate data usage limitation, finding that federal banking law did preempt that part of the litigation.

The IFPA was signed into law in June of 2024 and contested in a lawsuit brought by the Illinois Credit Union League, America’s Credit Unions, Illinois Bankers Association and American Bankers Association.

The law was initially scheduled to go into effect at the start of July of last year until Gov. J.B. Pritzker signed legislation delaying implementation for 12 months.