Federal Judge Extends Illinois Interchange Injunction To Federal CUs
By CU Today Staff —
CHICAGO— Federal credit unions have won protection from Illinois’ controversial interchange-fee restrictions, with Chief U.S. District Judge Virginia M. Kendall granting a permanent injunction barring enforcement of the state’s Interchange Fee Prohibition Act against FCUs, according to America’s Credit Unions.
The development marks a significant reversal from where federal credit unions stood when CUToday.info last reported on the litigation. In a June 1 ruling, Kendall permanently blocked Illinois from enforcing the IFPA’s interchange-fee limitation against national banks, certain out-of-state banks, federal savings associations and payment card networks, but left federal credit unions exposed to the restriction. Days later, NCUA issued an interim final rule affirming that federal credit unions have authority under federal law to impose and receive non-interest charges and fees, including interchange fees, and that conflicting state restrictions are preempted.
America’s Credit Unions said Kendall’s latest ruling reflects the change created by the NCUA action.
“This ruling validates the unified efforts of the credit union industry by confirming that federal credit unions are exempted from the IFPA’s interchange fee prohibition,” America’s Credit Unions President/CEO Scott Simpson said. “This clarification stemmed from the NCUA’s interim final rule that brought parity for federal credit unions with other preempted financial institutions. Although this does protect some credit unions, America’s Credit Unions alongside our partners at the Illinois Credit Union League are continuing our legal challenge and other efforts to ensure that all credit unions are protected and their members can continue to enjoy a safe and reliable payments system.”
The IFPA prohibits the collection of interchange fees on the tax and gratuity portions of credit and debit card transactions. Illinois lawmakers have delayed implementation of the restriction until July 1, 2027, as litigation continues.
The Defense Credit Union Council said it welcomes the court’s extension of preemption protections to federally chartered credit unions.
"Credit union members deserve the same certainty and protection as bank customers. But courtroom relief is not a substitute for repealing a fundamentally flawed law. The Illinois General Assembly should repeal the Interchange Fee Prohibition Act in full during its next legislative session. Military families, veterans, and working Americans deserve secure, reliable payments not costly mandates and uncertainty that threaten the affordable financial services they count on," stated Jason Stverak, DCUC chief advocacy officer.
Brandy Bruyere, partner at Honigman, LLP, noted that while this is a win for federal credit unions, state-chartered credit unions will still face challenges.
"And not just Illinois credit unions, but any credit union whose members travel to Illinois and use their cards to transact," she said.
Originally reported by CU Today.