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Three organizations representing the banking community, as well as the Office of the Comptroller of the Currency along with former acting members of the OCC, filed amicus briefs late Friday urging the court to overturn the decision to exempt Illinois merchants from paying interchange on the sales tax and gratuities that are part of credit and debit card transactions.
The organizations filing the briefs were the Bank Policy Institute, the Electronic Payments Coalition, the Electronic Transactions Association, the OCC, and a group of former and former acting Comptrollers of the Currency.
Amicus briefs, also known as friend of the court briefs, are documents filed by parties who are not associated with the case but have strong interests or expertise related to the matter and can provide the court with supplemental information, legal arguments, or perspectives not presented by the plaintiffs or defendants.
The briefs were filed a week after plaintiffs in the case filed a motion to appeal United States District Court Judge Virginia Kendall’s ruling last month to uphold the IFPA’s interchange exemption. In her ruling, Kendall also granted a preliminary injunction against the data-usage limitation portion of the law that would restrict financial institutions from using transaction data for fraud detection and rewards programs.
The parties filing the amicus briefs argued against Kendall’s findings that the IFPA does not supersede federal banking laws, specifically the National Bank Act, because the card networks, not banks, set interchange rates. Kendall ruled the card networks are not federally chartered banks.
The IFPA, scheduled to go into effect July 1, exempts Illinois merchants from paying interchange on sales tax and gratuities when consumers pay with a credit or debit card. In exchange, the state will cap what merchants earn for collecting sales tax at $1,000 per month.
In its brief, the ETA argued that the National Bank Act supersedes state laws that “significantly interfere” with nationwide banking, such as the IFPA. The ETA also argues that federal regulations take into account that banks will charge interchange fees set by the card networks. “This arrangement reflects the basic realities of the interconnected payment pipeline…” the ETA contends.
The ETA also argues that interchange fees must “be set by networks to avoid fragmentation and keep the system running.”
The OCC echoed similar sentiments in its brief, arguing that if Kendall’s ruling stood, the IFPA would “erode the essential infrastructure of the payments system.”
Once the court’s error is corrected, the OCC argues, it will become clear that “provision prevents or significantly interferes with federally authorized banking powers and is thus preempted by the National Bank Act.”
Plaintiffs applauded the support from the organizations filing the briefs, especially the support of the OCC. “We appreciate the strong support for our legal challenge to the Illinois Interchange Fee Prohibition Act in the amicus briefs filed Friday from a number of important stakeholders in the case,” Ben Jackson, executive vice president for the Illinois Bankers Association, and Ashley Sharp, senior vice president of the Illinois Credit Union League, said in a joint statement. “Most notably, we welcome the OCC’s conclusion that this misguided state law is clearly preempted by federal law, and the court should halt its implementation.”
Merchant organizations fired back, arguing that opponents of the IFPA are resorting to scare tactics when they claim implementation of the IFPA will create chaos in the card-payments system.
“Disturbingly, the credit card cartel continues to resort to disproven scare tactics to thwart this relief package, threatening to cause chaos for consumers when the law takes effect on July 1, 2026,” Rob Karr, president and chief executive of the Illinois Retail Merchants Association, says in a statement. “These companies are experts at adapting to different standards across the nation and world, so let’s be clear: any chaos created in Illinois will be their own doing.”
