- Key insight: The 7th Circuit ruled to remand the swipe fee challenge back to a lower court, days after another state swipe fee ban inched toward passage.
- Expert quote: "In light of the 7th Circuit's order, we welcome the opportunity to resume our legal challenge to the Illinois Interchange Fee Prohibition Act in district court. As we have consistently argued, the Illinois Interchange Fee Prohibition Act conflicts with federal law, and recent regulatory actions only reaffirm that fact." — Banking group plaintiffs in a statement
- Forward look: Colorado, whose legislature passed a similar ban likely to face similar scrutiny, could soon become the second state to ban interchange on portions of transactions.
A circuit judge on Friday ruled in favor of sending the banking industry's lawsuit attempting to block the Illinois Interchange Fee Prohibition Act back to a district court in Illinois for further proceedings. Absent further rulings, the law is set to go into effect on July 1.
A cohort including the Illinois Bankers Association, Illinois Credit Union League, American Bankers Association and America's Credit Unions issued a statement celebrating the 7th Circuit's decision. They say they welcome the opportunity to continue challenging the case back in the U.S. District Court for the Northern District of Illinois.
"In light of the 7th Circuit's order, we welcome the opportunity to resume our legal challenge to the Illinois Interchange Fee Prohibition Act in district court," the groups wrote in a statement. "As we have consistently argued, the Illinois Interchange Fee Prohibition Act conflicts with federal law, and recent regulatory actions only reaffirm that fact."
An ongoing legal and regulatory battle over swipe fees, which merchants pay banks on every transaction using credit card payment rails, is quickly being complicated as the Office of the Comptroller of the Currency recently
The
Shortly after the law's passage in 2024, the American Bankers Association, America's Credit Unions, Illinois Bankers Association and Illinois Credit Union League sued Illinois Attorney General Kwame Raoul to block the measure, saying the rule is technically unworkable, acts as a price control and could cost issuers millions. The state has subsequently
The OCC
"The Office of the Comptroller of the Currency's recent interim final actions directly address the core issues in this case and further strengthen our position that IFPA is preempted by federal law," the plaintiffs reiterated Friday, following the remand. "With the law scheduled to take effect in Illinois on July 1, it is critically important for all parties to recognize the need for a timely resolution to provide certainty for consumers, businesses and financial institutions."
Even as litigation draws on, lawmakers from both parties are moving ahead with their own bans. The Colorado House of Representatives
If passed, Colorado's "Swipe Fee Fairness and Consumer Safeguards Act" would prevent price collusion between payment card networks and banks, require predictable fee schedules and ban swipe fees on taxes. The measure establishes regulations on card networks themselves, over which OCC has no jurisdiction.
The same day as the Colorado law, plaintiffs filed a supplementary brief with the 7th Circuit, arguing the OCC's preemption determination reinforces their stance. Even without the OCC's move last month, the banking groups say the Illinois law meets the standard for preemption because it "significantly interferes with" federal banking powers under the National Bank Act.
