Future of Illinois Interchange Fee Prohibition Act remains uncertain

Since the enactment of the Illinois Interchange Fee Prohibition Act (IFPA) in June 2024, a coalition of banks and credit unions (Banks) have challenged the legality of a statute that would disrupt the nationwide payment system and increase cost and reduce awards for consumers. Following a recent legislative vote on June 1, 2026, and a subsequent order from the United States District Court for the Northern District of Illinois, the ultimate implementation of IFPA has once again been delayed.

Background

In June 2024, Illinois enacted the IFPA, a first-of-its-kind law prohibiting payment-card issuers, networks and processors from charging or collecting interchange fees on portions of a retail transaction that represent gratuities or state and local sales taxes[1]. An interchange fee, or “swipe fee,” is a transaction fee charged between banks for processing credit and debit card payments[2]. When a customer makes a purchase using a debit or credit card, the business’s acquiring bank pays the interchange fee to the cardholder’s issuing bank[3]. The interchange fee, which typically represents about 2% of the transaction cost, is paid by the retailer and often passed on to consumers[4].

Procedural history

In August 2024, the Banks sued to block implementation of the IFPA primarily on preemption grounds arguing that the statute is preempted by the National Bank Act, along with other federal statutes[5]. In December 2024, the United States District Court for the Northern District of Illinois (District Court) issued a partial preliminary injunction blocking enforcement of the IFPA against national banks and federal savings associations but denying relief as to Illinois-chartered institutions on sovereign-immunity grounds[6].

In February 2026, the District Court partially granted the parties’ cross-motions for summary judgment. Most critically, the District Court decided that federal law does not preempt the statute’s Interchange Fee Provision and therefore upheld that part of the IFPA[7]. The parties subsequently cross-appealed to the Seventh Circuit.

In April 2026, the Office of the Comptroller of the Currency (OCC) stepped in to assist the Banks on the issue of preemption by issuing an interim final rule confirming that federal law governs the nationwide payment system. As a result of the OCC’s interim final rule, the Seventh Circuit remanded the case back to the District Court for further consideration of the OCC’s decision[8].

On June 1, 2026, in its final legislative session of the year, the Illinois General Assembly voted to delay the implementation of the IFPA by one year, pushing its effective start date back from July 1, 2026, to July 1, 2027, which is expected to be signed into law by the governor.

That same day, the District Court issued a new order evaluating the impact of the OCC’s interim final rule on the case. The District Court ruled that the OCC’s amendments materially altered the preemption analysis contained in prior order as applied to national banks, federal savings associations and federally protected out of state banks. As such, the District Court ruled that federal law preempts the Interchange Fee Prohibition as to these entities and granted the Banks’ request for a permanent injunction[9].

However, Illinois state-chartered banks and credit unions remain subject to the IFPA. With the IFPA’s effective date delayed for at least another year, the Banks intend to continue their appeal efforts and work with policymakers to ensure equal treatment for all participants in the nationwide payment system[10].

The lawyers in Chuhak & Tecson’s Financial Services practice group can provide counsel on changes in the law. Contact us to discuss.

Client alert authored by Martin J. Crowley (312 855 4604), associate.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

[1] https://laweconcenter.org/resources/regulating-state-interchange-fees-evaluating-the-likely-effects-of-the-ifpa/

[2] https://stripe.com/resources/more/interchange-fees-101-what-they-are-how-they-work-and-how-to-cut-costs

[3] Id.

[4] https://capitolnewsillinois.com/news/in-a-victory-for-consumers-pioneering-swipe-fee-law-survives-first-legal-challenge/

[5] https://www.aba.com/about-us/press-room/press-releases/new-illinois-law-restricting-interchange-fees

[6] https://bankingjournal.aba.com/2026/06/judge-kendall-permanently-enjoins-ifpa-interchange-fee-prohibition-for-most-banks-and-payment-card-networks/

[7] Id.

[8] Id.

[9] Id.

[10] https://bankingjournal.aba.com/2026/06/court-rules-federal-law-preempts-illinois-interchange-law/