The U.S. District Court for the Northern District of Illinois ruled that the National Bank Act (NBA) does not preempt Illinois’ Interchange Fee Prohibition Act (IFPA), which prohibits credit card and debit card transaction processors from charging interchange fees on the portion of any card transaction that includes state and local taxes and gratuities.
In 2024, Illinois enacted the IFPA which has two components: (i) the prohibition on interchange fees on state and local taxes and gratuities, and (ii) a data usage limitation prohibiting all entities in a transaction other than merchants from distributing, exchanging, transferring, disseminating, or using transaction data except to facilitate or process the payment. Following the court granting a preliminary injunction, the Illinois Bankers’ Association requested a permanent injunction against the IFPA, arguing that the NBA preempts IFPA. The court rejected that preemption request, concluding that payment card networks, rather than banks, set the interchange rates the IFPA is regulating. Because the IFPA’s limitation on interchange rates “does not directly regulate banks”, the NBA does not preempt the IFPA’s regulation of interchange rates. The court similarly concluded that the IFPA’s interchange fee limitation was not preempted for out-of-state banks or federal credit unions.
The court reached a different conclusion as to the IFPA’s. data usage limitation, granting a permanent injunction regarding the IFPA’s data usage limitation as to national banks, out-of-state banks, federal credit unions, payment card networks and “others involved in the payment process” because the data limitation “directly constrains” the power of national banks to process data “to monitor credit card fraud, address payment disputes, and facilitate cardholder loyalty programs.” The court went on to agree that the data usage limitation is “so tied up” between the parties, that preemption must run to the others involved in the payment process as well, not just national banks.
The case is now on appeal at the U.S. Court of Appeals for the Seventh Circuit, with oral arguments anticipated to take place in May, in advance of the IFPA taking effect on July 1, 2026.
Ill. Bankers Ass’n v. Raoul, Case No. 24 07307 (N.D. Ill. Feb. 10, 2026).