Score one for federal credit unions.
A federal court just threw them a lifeline in the ongoing legal saga over Illinois’ controversial interchange fee law—and yes, this fight is far from over.
Here’s the deal: On Tuesday, the District Court for the Northern District of Illinois granted a permanent injunction that exempts federal credit unions from the state’s Interchange Fee Prohibition Act (IFPA). Translation? Federal credit unions won’t have to comply with a law that would’ve banned them from collecting interchange fees on the tax and tip portions of credit card transactions.
The win came after America’s Credit Unions, the Illinois Credit Union League, and other industry groups challenged the law following its 2024 enactment. Think of it as David versus Goliath, except David brought several friends and some really good lawyers.
What This Means
“This ruling validates the unified efforts of the credit union industry by confirming that federal credit unions are exempted from the IFPA’s interchange fee prohibition,” said Scott Simpson, President and CEO of America’s Credit Unions. But he was quick to add a reality check: this only protects some credit unions. State-chartered credit unions? Still in limbo.
Simpson emphasized that America’s Credit Unions and their Illinois partners aren’t popping champagne just yet. They’re continuing their legal fight to make sure all credit unions—not just the federal ones—stay protected so members can keep enjoying “a safe and reliable payments system.”
The Domino Effect
This latest decision is actually part of a broader pattern. Judge Virginia Kendall had already issued injunctions protecting national banks, federal savings associations, out-of-state state-chartered banks, and payment card networks from the IFPA. Federal credit unions were initially left out in the cold because they’re not under the Office of the Comptroller of the Currency’s supervision.
Enter the National Credit Union Administration. In June, the NCUA issued an interim final rule that essentially said, “Hey, the Federal Credit Union Act preempts this Illinois law.” Judge Kendall took another look at the case in light of that rule and decided to extend the injunction to federal credit unions too.
Who’s Still on the Hook?
Here’s where things get messy. With all these exemptions carved out, the IFPA—if it actually takes effect next July—would mainly hit state-chartered institutions, particularly those chartered in Illinois. That’s created an uneven playing field that has industry groups calling for state lawmakers to just scrap the whole thing.
“The order means that only certain state-chartered institutions, and especially those chartered in Illinois, would be forced to comply with the misguided law,” said the Illinois Bankers Association, American Bankers Association, and other trade groups in a joint statement. They’re urging Illinois legislators to “do the responsible thing” and repeal the law entirely to avoid what they’re calling “payment chaos.”
What Happens Next?
The case is now heading back to the 7th Circuit Court of Appeals, and there’s a real possibility it could climb all the way to the U.S. Supreme Court. So if you’re keeping score at home, this story is nowhere near its final chapter.
America’s Credit Unions has made it clear they’re in this for the long haul, committed to protecting all credit unions from policies that would upend the interchange system. Because at the end of the day, this isn’t just about fees—it’s about keeping the payment infrastructure stable for millions of members who rely on their credit unions every day.
Stay tuned. This legal thriller has more twists ahead.
Related:
CUs have another year to comply with Illinois’ interchange, preemption question remains
DCUC Warns Illinois Interchange Law Threatens Payment System Stability, Applauds OCC Response