OCC's Gould vows to defend preemption 'as appropriate'

• Key insight: Comptroller of the Currency Jonathan Gould is defending his maximalist stance toward preemption, vowing to fight state efforts to supplant federal authority where appropriate. 
• Supporting data: Nearly a dozen states are considering whether to pass laws restricting the kinds of transitions that can be subject to credit card swipe fees, like one passed by Illinois in 2024. 
• Forward look: A law recently passed by Colorado's legislature could be harder for the OCC to challenge as it was crafted to regulate payment processors, rather than banks themselves. 

Comptroller of the Currency Jonathan Gould on Wednesday said the agency is prepared to defend preemption in jurisdictions around the country, following its preemption determination blocking a recent Illinois swipe fee ban from applying to nationally chartered banks. 

At Semafor's Banking on the Future Forum, Gould was asked whether the OCC might intervene in one of the eleven other states pursuing similar swipe fee bans. While he declined to comment directly on the Illinois law, saying he is "recused on that issue," he reiterated a maximalist stance toward preemption in general. 

"We will continue to defend preemption in legal courtrooms as appropriate," Gould said at the fireside chat. "Ultimately the parameters of preemption are all downstream from the political consensus that's necessary to maintain it. So, for those of you who care about preemption, please, please educate your members of Congress and your senators on why it matters."

The OCC chief's comments come as the agency takes a growing role in an ongoing legal and regulatory battle over swipe fees, which merchants pay banks on every transaction involving a credit card, is quickly being complicated as a growing number of states concoct bans on interchange for certain portions of transactions like taxes and tips.

The Illinois Interchange Fee Prohibition Act, signed into law by Governor J.B. Pritzker in 2024, bars banks and their affiliated card networks from levying such fees on the state sales tax and gratuity portions of transactions, with state officials saying merchants should not be charged for processing nonrevenue. 

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 moved to delay the law's implementation for a year. A federal judge ruled in February to uphold the law; plaintiffs have appealed the district court's ruling, and a ruling on that appeal is expected by mid-June. 

In the midst of the ongoing litigation, the Office of the Comptroller of the Currency moved to preempt Illinois' tax-and-tip interchange ban in a rule issued last month. The OCC issued two interim final rules in April: one affirming banks' authority to charge fees set by third parties and another explicitly preempting Illinois' law restricting interchange fees on taxes and tips, with the preemption effective on June 30, 2026. 

Gould's vow to continue to defend preemption comes after the OCC's preemption powers have been somewhat curtailed in recent years. A 2024 Supreme Court decision — Cantero v. Bank of America requires a higher burden of proof for national banking rules and laws to preempt state laws.

The Supreme Court's decision in Cantero held that a lower court had applied the wrong test when it ruled the National Bank Act preempted a New York law requiring banks to pay interest on escrow accounts as applied to national banks.

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The lower court had found that the NBA preempted New York's escrow interest law because it was deemed to exert "control" over the national bank's power to create and fund escrow accounts by requiring the national bank to pay interest on customer's escrow accounts. In Cantero, the Supreme Court remanded the case back to the lower court and instructed the Circuit to analyze whether the state law "significantly interferes" with the national bank's ability to exercise its federally granted power, a higher legal bar known as the Barnett standard.

The Colorado House of Representatives passed a measure earlier this month banning banks from charging interchange fees on the sales tax component of transactions, sending the bill to Governor Jared Polis for his consideration. 

The Colorado law awaiting signature was crafted in a way that makes an OCC preemption harder to apply, merchant advocates say. The Colorado law, known as the "Swipe Fee Fairness and Consumer Safeguards Act" would prevent payment card networks from "conspiring to fix" interchange fees in coordination with credit card issuing banks, establishing predictable fee schedules and removing taxes from the portion of a transaction subject to swipe fees. The measure establishes regulations on card networks themselves, over which OCC has no jurisdiction.