In our last article, we warned IBA members that the Illinois Interchange Fee Prevention Act (the “IFPA”) threatened to prevent not just Illinois-based banks, but also Indiana banks, from assessing interchange fees on Illinois-based transactions. What a difference a few weeks makes—as the Seventh Circuit Court of Appeals weighed the industry’s challenge to the new law, the Office of the Comptroller of the Currency (“OCC”) issued an Interim Final Rule1OCC, National Banks and Federal Savings Associations as Lenders, 91 Fed. Reg. 21,458 (May 19, 2026) (to be codified at 12 C.F.R. pts. 7, 34, 160). and an Order Preempting the Illinois Interchange Fee Prohibition Act,2OCC, Order Preempting the Illinois Interchange Fee Prohibition Act, 91 Fed. Reg. 23,150 (Apr. 29, 2026) (interim final order) and the Illinois legislature acted to further delay the IFPA’s effective date to July 1, 2027.
On May 8, 2026, the Seventh Circuit Court of Appeals vacated the lower-court decision and remanded the case to the U.S. District Court for the Northern District of Illinois to consider the new OCC rulemaking. The Interim Final Rule expanded the definition of bank charges to include obtaining fees “directly or indirectly, through intermediaries, partners, payment networks, interchanges, or other third parties . . . .” This expanded definition of charges effectively addressed the court’s earlier position, in denying the industry’s petition for permanent injunctive relief, that OCC rules preempting state restrictions on fees did not extend to fees determined and assessed by third-party service providers.
Until a final ruling is issued, Indiana banks should continue to monitor developments in this litigation.
In light of this expanded definition of charges, on June 1, the U.S. District Court issued a permanent injunction against the enforcement of the IFPA against national banks, out-of-state banks, federal savings associations, and payment card networks.3Illinois Bankers Association v. Raoul, No. 24-cv-07307 (N.D. Ill. June 1, 2026). Notably, in the absence of a similar rulemaking by the National Credit Union Administration (“NCUA”) asserting principles of preemption, the court did not enjoin enforcement of the IFPA against credit unions in its ruling, and as of then, credit unions remained subject to this law. However, this distinction may be short-lived, as the NCUA issued its Interim Final Rule4National Credit Union Administration, Federal Credit Union Loans and Interest Rates; Preemption of State Interchange Fee Laws, Interim Final Rule, 91 Fed. Reg. 24844 (June 13, 2026) (to be codified at 12 C.F.R. pts. 701 and 741). asserting preemption of the IFPA on June 9, 2026, and the credit union industry has now petitioned the court to expand the permanent injunction to include credit unions.5See Plaintiffs’ Motion to Reconsider in Part Denial of Summary Judgment, Illinois Bankers Ass’n v. Raoul, No. 24-cv-07307 (N.D. Ill. June 12, 2026).
So, what does this mean for Indiana banks? In the short term, the delayed effective date and the permanent injunction mean debit and credit card transactions can continue in Illinois as before. The Illinois Attorney General is expected to appeal the District Court’s decision to the Seventh Circuit Court of Appeals, and that court is likely to consider the case before the IFPA becomes effective on July 1, 2027. While it appears unlikely that the Seventh Circuit Court of Appeals would overturn the lower court’s decision, until a final ruling is issued, Indiana banks should continue to monitor developments in this litigation.
This information is provided for general education purposes and is not intended to be legal advice. Please consult legal counsel for specific guidance as to how this information applies to your institution’s circumstances or situation.
