- Key insight: Bank and credit union trade groups filed a motion Wednesday asking a federal judge to resolve a key legal question about Illinois' Interchange Fee Prohibition Act by June 3.
- What's at stake: The groups warned that financial institutions face "drastic actions" if the court doesn't act before the law takes effect July 1.
- Forward look: The Illinois law, signed by Gov. J.B. Pritzker in 2024, would prohibit banks and card networks from collecting interchange fees on the tax and gratuity portions of credit card transactions, a requirement the industry says is technically unworkable given how current payment infrastructure operates.
With less than five weeks until a
In a filing Wednesday in the U.S. District Court for the Northern District of Illinois, bank and credit union trade groups urged the court to resolve a legal question by June 3, warning that financial institutions are being forced to weigh "drastic actions" as the Illinois Interchange Fee Prohibition Act's July 1 effective date draws near.
The law, signed by Gov. J.B. Pritzker in 2024, would bar banks and card networks from collecting interchange fees on the tax and gratuity portions of credit card transactions. Banks have complained that this arrangement would create an unworkable situation for them, as the current infrastructure for card purchases doesn't isolate an interchange fee on just the taxes or tip of a purchase.
In the filing, the defendant, Illinois Attorney General Kwame Raoul, opposed the accelerated timeline, saying that it "is impracticable and overly burdensome in view of the expected benefits."
"For an argument to occur, in the next six business days, as plaintiffs request, it is likely that both the Court and counsel will be required to set aside other matters and reschedule other commitments," the defendant said, according to the filing.
The lawsuit prompted the Office of the Comptroller of the Currency
The OCC argued the Illinois law would create a "complex, potentially unworkable, and destabilizing" set of rules on banks and payment card systems, especially if other states follow with similar measures.
"These fees, which include interchange fees, compensate these institutions for the costs of their participation, incentivize their provision of services and continued participation in the network, and enable enhancements, such as fraud detection and prevention, rewards programs, and technology upgrades," the OCC said. "Federal savings associations are neither subject to nor required to comply with these provisions of State law."
The OCC has also filed an
