Industry Plaintiffs Seek Reconsideration of Illinois Interchange Fee Ruling Following NCUA Rule

Case Snapshot

• Court: U.S. District Court for the Northern District of Illinois
• Case: Illinois Bankers Association et al. v. Kwame Raoul, Case No. 1:24-cv-07307
• Core Issue: Whether the Federal Credit Union Act preempts Illinois’ Interchange Fee Prohibition Act as applied to federal credit unions.
• Key Allegation: Plaintiffs argue that a newly issued NCUA interim final rule changes the legal landscape and supports federal preemption.
• Court Holding: Pending.
• Outcome: Plaintiffs seek reconsideration of the court’s prior ruling regarding federal credit unions.
• Notable Detail: The motion follows the court’s June 1 ruling that the IFPA is preempted as applied to national banks, federal savings associations, and out-of-state state-chartered banks, but not federal credit unions.

Industry trade groups challenging the Illinois Interchange Fee Prohibition Act (IFPA) have asked a federal court to reconsider part of its recent ruling after the National Credit Union Administration (NCUA) issued an interim final rule addressing federal credit unions’ authority to charge interchange fees.

The June 12 motion, filed in the U.S. District Court for the Northern District of Illinois by the Illinois Bankers Association, American Bankers Association, America’s Credit Unions, and Illinois Credit Union League, argues that the NCUA’s June 9 interim final rule represents an “intervening change in controlling law” that could affect whether the Federal Credit Union Act (FCUA) preempts Illinois’ interchange fee restrictions as applied to federal credit unions.

Plaintiffs Focus on Federal Credit Union Preemption

The latest filing stems from ongoing litigation challenging Illinois’ IFPA, a law that restricts the collection of interchange fees on taxes and gratuities included in card transactions.

On June 1, Judge Virginia Kendall ruled that the IFPA’s interchange fee prohibition is preempted when applied to national banks, federal savings associations, and out-of-state state-chartered banks. However, the court did not revisit its earlier conclusion that the FCUA does not preempt the law as applied to federal credit unions.

The plaintiffs contend that the NCUA’s interim final rule directly addresses that issue by clarifying that federal credit unions have authority under federal law to impose non-interest charges and fees, including interchange fees, even when those fees are established by or in consultation with third parties.

According to the motion, the NCUA rule warrants reconsideration because it bears directly on the preemption analysis that the court previously applied to federal credit unions.

Motion Seeks Limited Additional Briefing

The trade groups are asking the court to reconsider the portion of its decision addressing federal credit unions before the case returns to the U.S. Court of Appeals for the Seventh Circuit.

While Illinois Attorney General Kwame Raoul opposes additional relief under the FCUA, the parties agree that allowing the district court to address the NCUA rule now could help avoid piecemeal litigation and improve judicial efficiency, according to the filing.

The plaintiffs proposed a streamlined process under which each side would submit a brief of no more than five pages by June 18, focused solely on the impact of the NCUA rule on the case.

Why the NCUA Rule Matters

The dispute highlights the growing significance of federal preemption questions surrounding interchange fee regulation.

If the court determines that the FCUA preempts the IFPA’s interchange fee restrictions, federal credit unions could join national banks and federal savings associations in being shielded from portions of the Illinois law. Such a ruling would further narrow the categories of financial institutions subject to the state’s interchange fee limitations.

The court has not yet ruled on the plaintiffs’ motion for reconsideration.