Merchants And Banks in the IFPA Case Tangle Over a Motion for Summary Judgement

Attorneys for plaintiffs and defendants in the lawsuit challenging the Illinois Interchange Fee Prohibition Act presented oral arguments Wednesday on plaintiff’s motion for Summary Judgment in the case.

Attorneys for the plaintiffs argued that the preliminary injunction against the IFPA be broadened so that all financial institutions are exempt from the law, not just those regulated under the National Banking Act. The preliminary injunction, issued in 2024, does not exempt Illinois chartered banks or credit unions from the IFPA. In June, Illinois lawmakers extended the implementation date for the IFPA by 12 months, to July 1, 2026.

“The aim of injunctive relief is to give complete relief, and this court has the power to give us complete relief,” the attorney for the plaintiffs told United States District Court Judge Virginia Kendell, who is presiding over the case.

Plaintiffs in the case are the American Bankers Association, the Illinois Bankers Association, America’s Credit Unions, and the Illinois Credit Union League.

In making their case for broader relief, plaintiff’s attorneys argued that the Illinois Banking Act gives banks chartered in the state the “same powers and protections” granted banks regulated under the National Banking Act (NBA). Plaintiffs’ attorneys also argued there is no language within the Federal Credit Union Act that exempts credit unions from the NBA.

At the crux of plaintiffs’ argument is that the IFPA keeps card issuers, including banks and credit unions, from being fully compensated for the services they provide, including transaction authorization and fraud detection, because the IFPA exempts interchange on sales tax and tips.

“I get your theory,” Judge Kendell told the plaintiffs’ attorney.

Attorneys for the defendant, the Illinois Attorney General’s office, asked the court to deny the plaintiffs’ challenge to the IFPA, arguing that the law does not severely crimp interchange revenues, as tax and tips make up a small percentage of a card transaction.

When asked by Judge Kendell whether the IFPA will prevent issuers from getting paid for services they are performing, the defendant’s attorneys replied that card issuers are “still getting quite a bit of interchange” and the IFPA applies to a small portion of a card transaction, which is “not extreme.”

Attorneys representing the Illinois Retail Merchants Association and three member associations of the Merchants Payments Coalition, NACS, the National Retail Federation and FMI — the Food Industry Association, also participated in the oral arguments, arguing the IFPA should be upheld.

Upon conclusion of the hearing, the Illinois Bankers Association and the Illinois Credit Union League issued this joint statement: “Today’s hearing provided us a great opportunity to reiterate our legal arguments demonstrating that IFPA is not only bad policy that will create chaos in Illinois every time someone tries to use their credit card, it’s also clearly pre-empted by federal law,” the two organizations said. “The court has already concluded that national banks are entitled to relief from the law, and today we were able to show why other players … including Illinois’s community banks and credit unions, deserve the same relief.”

The Illinois Retail Merchants Association, a strong supporter of the IFPA, did not issue a statement.

But other entities in the payments industry weighed in on the proceedings, which over time have drawn national attention.

“Banks are desperate to deny reality,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said in a statement. “They want the court to ignore the fact that banks don’t set swipe fees and that Visa and Mastercard do. Banks hide behind price-setting by those credit card giants — and now the credit card giants are trying to hide behind banks in court to overturn a sensible law. It is simply unfair for merchants to pay swipe fees on tax and tip money that they must give to the state or employees. The credit card giants should stop punishing merchants for providing a service to the state and employees.”

The Electronic Payments Coalition reiterated its support for overturning the IFPA.

“This reckless law threatens every consumer and small business in Illinois with higher costs and less fraud protections. It must be struck down in the courts and fully repealed by the General Assembly before unleashing credit card chaos at checkout counters statewide,” EPC Executive Chairman Richard Hunt said in a statement. “Today’s court arguments made it undeniably clear: this deeply flawed, experimental law puts the efficiency and benefits of our financial system at serious risk.”