Illinois Bankers Association, et al, v. Kwame Raoul

  • U.S. District Court for the Northern District of Illinois, Eastern Division
  • Filed
  • Updated

Case Movement

Case Details

Issue

Whether the Illinois Interchange Fee Prohibition Act (IFPA) is preempted by federal law.

October 4, 2024

On October 4, 2024, the Restaurant Law Center, together with the Illinois Restaurant Association and the Retail Litigation Center, filed a brief in support of Illinois Attorney General Kwame Raoul arguing that there are currently no federal laws or regulations that govern the cost of credit card transactions within the U.S. payments ecosystem. This regulatory vacuum has enabled card networks to charge U.S. merchants the highest interchange fees in the industrialized world. Thus, IFPA provides needed restrictions in a payment ecosystem that is broken and badly in need of reform.

April 25, 2025

On Friday, April 25, 2025, the Restaurant Law Center, joined by the Illinois Restaurant Association and the Retail Litigation Center, asked the federal court to dismiss the challenge to IFPA. We reiterated our support for IFPA’s laudable attempt to solve a major problem by providing much needed relief from the exorbitant and ever-mounting interchange fees charged by credit card networks in the State of Illinois. As we point out in our filing, issuers’ grievances with IFPA’s relatively modest reduction in interchange fees that would result from excluding the portion of a transaction attributable to taxes and gratuities for sales in Illinois are significantly overstated, and reform to the payment ecosystem is sorely needed.

February 10, 2026

On February 10, 2026, Chief Judge Virginia M. Kendall issued a comprehensive merits opinion partially granting summary judgment motions pending from each side of the litigation. The court held that:

  • The IFPA’s Data Usage Limitation was preempted or otherwise invalid as applied to national banks, federal savings associations, qualifying out-of-state banks, federal credit unions, and entities acting on their behalf in the payment ecosystem.
  • The IFPA’s Interchange Fee Limitation was preempted as applied to national banks, federal savings associations, and certain out-of-state banks.
  • The court declined at that time to extend interchange-fee preemption to federal credit unions or payment card networks.

Following the summary judgment ruling, the court entered a final judgment and permanent injunction reflecting its February opinion. Both sides immediately appealed.

Illinois Attorney General Kwame Raoul filed a cross-appeal challenging the portions of the ruling that invalidated parts of the IFPA.

The banking and credit union plaintiffs appealed portions of the ruling that limited preemption.

April – May 2026: OCC Intervention

While the appeals were pending, the Office of the Comptroller of the Currency (OCC) issued an Interim Final Rule and a separate order expressly asserting that federal banking law preempts the IFPA’s restrictions on interchange fees for national banks. The OCC’s actions were issued in direct response to Judge Kendall’s February decision and fundamentally changed the legal landscape surrounding the case.

May 8, 2026: Seventh Circuit Remand

The U.S. Court of Appeals for the Seventh Circuit vacated the district court’s February permanent injunction and remanded the case to Judge Kendall for the limited purpose of evaluating the effect of the OCC’s new regulatory actions. The appellate court directed the district court to consider the federal intervention before proceeding with the appeal.

Jun 1, 2026: Expanded Permanent Injunction

Following expedited briefing on the OCC’s new rule, Judge Kendall issued a second major opinion.

The court concluded that the OCC’s revised regulation significantly strengthened the banks’ preemption arguments and held that the IFPA’s interchange-fee prohibition could not be enforced against:

  • National banks;
  • Federal savings associations;
  • Covered out-of-state state-chartered banks; and
  • Payment card networks.

Of particular significance, the court expanded the injunction to cover payment card networks such as Visa and Mastercard, finding that effective relief could not be provided to federally regulated banks without protecting the network infrastructure through which interchange fees are established and collected.

Summer 2026: NCUA Enters the Dispute

After the OCC acted, the National Credit Union Administration (NCUA) issued its own Interim Final Rule modeled closely on the OCC’s action. The NCUA took the position that federal credit unions possess federally protected authority to charge and receive interchange fees and that the IFPA interfered with those federally authorized activities.

September 22, 2026: Federal Credit Unions Added to Injunction

In response to the NCUA’s action, Judge Kendall granted the plaintiffs’ motion for partial reconsideration and expanded the injunction once again.

The court held that the IFPA’s interchange-fee prohibition is also preempted as applied to federal credit unions because Illinois’ restrictions interfere with federally authorized credit-card and lending activities. As a result, federal credit unions joined the classes of entities already protected from enforcement of the IFPA.