Financial Institutions Press Their Case Against Illinois’s Interchange Law

Plaintiffs in the lawsuit challenging the Illinois Interchange Fee Prohibition Act are pushing hard to make their case that national banking laws pre-empt the IFPA, which is scheduled to go into effect July 1.

In a motion filed late Wednesday, the plaintiffs argued that federal banking laws supersede the Illinois law and exempt not only federally chartered financial institutions, including credit unions, from the IFPA, but also out-of-state financial institutions doing business in Illinois, such as the card networks, processors, and “and any other non-exempt entities to carry out functions that facilitate the charging or receipt of interchange by protected institutions.” Plaintiffs argued the latter groups are exempt from the IFPA under the dormant Commerce Clause.

The dormant Commerce Clause is an implied limitation on state power derived from the Commerce Clause within the U.S. Constitution and prevents states from passing laws that unduly burden or discriminate against interstate commerce.

As part of their request for injunctive relief from the IFPA, plaintiffs argued the National Banking Act and the Supremacy Clause “are vital to the dual banking system on which the state and national economy rest.”

Plaintiffs also argued that the “Supreme Court has long held state laws invalid where they accomplish a ‘significant interference’ with national banks’ business by burdening the banks’ customers or other third parties.”

“Our filing makes clear why every participant in the Illinois payment system, including the state’s community banks and credit unions, deserves to be spared from the harm the Illinois Fee Prohibition Act would unleash if allowed to take effect on July 1,” the Illinois Bankers Association and the Illinois Credit Union League, two of the plaintiffs in the case, said in a statement. “The biggest losers from this misguided state law will be small businesses and consumers who will experience chaos and confusion every time they try and use their credit card to pay for gas, groceries or a family dinner at a local restaurant.”

The plaintiffs asked the court, which they claim has the “power to fashion a remedy that affords complete relief to Plaintiffs” to “look closely at the facts and the law, which are both on our side” and “reject the Attorney General’s effort to hollow out the Supremacy Clause.” Plaintiffs asked the court to issue “a broad injunction that provides meaningful relief.” 

The Illinois Retail Merchants Association, which supports the IFPA, had no comment on the plaintiff’s latest motion.

Late last month, Illinois Senator Dick Durbin, who recently announced he will not seek re-election in 2026, filed a second amicus brief in the District Court for the Northern District of Illinois, which is hearing the case, in support of the IFPA. Durbin previously filed an amicus brief in support of the IFPA in 2024.

In his latest brief, Durbin argues that “because all card-issuing banks follow the fee schedules Visa and Mastercard set, to make reform work across participants in the Visa and Mastercard systems, all that must be done is to obligate the card network companies to change their fee schedules, as the IFPA would do.”

Durbin, who has said he plans to retire from the Senate, added that “the IFPA’s application to card network companies also does not, as the [Office of the Comptroller of the Currency] stated in its brief, ‘undermine the uniformity necessary for the smooth and effective functioning of the national payment system.”

The Illinois Attorney General’s office is expected to file a response to plaintiffs’ latest motion by the end of the month. A hearing on the latest motions in the case is expected to take place in June.

In addition to challenging the IFPA in the courts, plaintiffs have also filed a bill to overturn the IFPA in the Illinois House of Representatives. The Illinois General Assembly is scheduled to adjourn for its summer recess at the end of the month.