NCUA Finalizes Preemption Rule, Clearing Path For FCUs To Continue Collecting Interchange Fees
By CU Today Staff —
ALEXANDRIA, Va.— NCUA has finalized an interim rule clarifying that federal credit unions have the authority under the Federal Credit Union Act to impose non-interest charges and fees—including interchange fees—and that those activities are not subject to conflicting state laws.
The action follows months of industry attention on the Illinois Interchange Fee Prohibition Act (IFPA) and comes after the NCUA signaled it was preparing a preemption rule similar to one adopted by the Office of the Comptroller of the Currency. CUToday.info previously reported that the proposal had been submitted to the White House Office of Management and Budget for review, indicating the agency was preparing to move forward with a federal preemption framework for credit unions.
In announcing the interim final rule Monday, NCUA said it has exclusive authority over federal credit unions' ability to charge non-interest fees and charges. The agency stated the rule is intended to preempt any state law affecting non-interest charges and fees related to payment card services, including interchange fees.
NCUA said it already believes its existing regulations permit federal credit unions to receive fees established by third parties without state interference. However, the agency said it adopted the rule to eliminate uncertainty and prevent any competitive disparity between federal credit unions and national banks after the OCC issued its own interim final rule and preemption order addressing interchange fees and the Illinois law. The OCC's actions take effect June 30 as well.
The Defense Credit Union Council said it appreciates the NCUA board for taking “timely and decisive” action to clarify federal credit unions’ authority to charge and receive non-interest charges and fees, including interchange fees, and to make clear that conflicting state laws affecting payment-card services are preempted.
“This is the clarity DCUC has been urging NCUA to provide,” said Jason Stverak, DCUC chief advocacy officer. “For defense and veterans credit unions, and for the servicemembers, veterans, and military families they serve, a fragmented state-by-state payments regime is not an abstract policy concern. It would increase operational complexity, create uncertainty for credit unions and merchants, undermine fraud-prevention and cybersecurity investments, and threaten the reliable, low-friction digital payments military communities depend on wherever duty takes them.”
Stverak said the NCUA’s interim final rule helps restore parity for federal credit unions, aligns supervisory clarity with the realities of modern payment networks, and preserves a uniform national framework for safe, sound, and efficient credit union service.
“DCUC has repeatedly urged NCUA to review its authority, coordinate with other federal regulators, and act before inconsistent state mandates could disrupt payment access or increase costs for members,” he said. “We welcome this rule and look forward to supporting a strong final rule that protects federal credit union powers, payment-system stability, and the financial readiness of America’s military and veteran communities.”
Scott Simpson, president/CEO of America’s Credit Unions, and Libby Calderone, president/CEO of Illinois Credit Union League, issued the following joint statement:
"Americans rely on the electronic payments system every day for its stability and predictability. The Illinois law, driven by mega-retailers, would disrupt that system, create confusion for millions of consumers, and encroach on federal law. We appreciate Chairman Hauptman and the NCUA for their leadership in preventing a patchwork of state laws by reaffirming that credit unions are exempt from state regulations affecting non-interest charges and fees, including interchange fee prohibitions. With this federal preemption confirmed, we will continue our relentless advocacy to protect the safety and stability of the national payments system for our credit union members and the 146 million Americans who depend on them."
Originally reported by CU Today.