America’s Credit Unions and the Illinois Credit Union League joined with banking groups in filing a complaint in the U.S. District Court for the Northern District of Illinois that challenges the Illinois Interchange Fee Prohibition Act (IFPA).  The American Bankers Association and Illinois Bankers Association are also involved in the legal challenge, which seeks a preliminary injunction halting implementation of the new law while the court decides the merits of the case.

The IFPA was signed into law on June 7. It would ban financial institutions – including credit unions, payment networks and other entities from charging or receiving interchange fees in Illinois on the portion of a debit or credit card transaction attributable to tax or gratuity. 

“Illinois lawmakers made a grave mistake when throwing small businesses, consumers, and local economies to the wayside in the Land of Lincoln when they passed the IFPA,” said Jim Nussle, America’s Credit Unions president/CEO. “America’s Credit Unions is joining this lawsuit with our banking trade partners to send a clear message – we will always stand up for the American consumer when interchange and the electronic payment ecosystem is disrupted to benefit bad actors and big box retailers. With over 4 million people in Illinois trusting credit unions to help live their best financial lives, it is our duty to combat unconstitutional legislation.”

“The Interchange Fee Prohibition Act would create a significant disruption to a global interchange system that works well today,” said Tom Kane, president/CEO of the Illinois Credit Union League. “The Act presents major challenges for all financial institutions - small and large - while providing a windfall to the largest retailers doing business in Illinois. Most concerning of all, the Act will have a negative impact on small businesses and consumers in Illinois that rely upon safe and convenient card transactions. The filing of this litigation ensures that the courts will carefully review the legality of this Illinois law, which has never been tried anywhere else in the world.”

The filing outlines concerns with the new law, and how – if implemented - it would:

• Throw the modern and efficient payment system into chaos;
• Undermine the significant benefits that credit and debit cards provide to consumers and businesses;
• Violate multiple federal statutes including the Federal Credit Union Act and the National Bank Act; and
• Be unenforceable against federal or state-chartered credit unions, national or state-chartered banks, federal or state savings institutions, nor their service providers.  

The filed complaint asks the court to declare the state legislation preempted and unconstitutional as applied, and to prevent Illinois from taking any investigatory or enforcement actions based on the law.