The Seventh Circuit U.S. Court of Appeals today remanded the American Bankers Association’s lawsuit back to the district court to evaluate the effect of the Office of the Comptroller of the Currency’s interim final measures issued last month. Along with this, the Seventh Circuit vacated the district court’s ruling that partially upheld the Interchange Fee Prohibition Act.
The IFPA bans banks, payment networks and other entities from charging or receiving interchange fees in Illinois on the portion of a debit or credit card transaction attributable to tax or gratuity. The American Bankers Association and other groups have challenged the IFPA in federal court. However, earlier this year, a district court judge upheld most of the law, striking down only the portion pertaining to data sharing.
The OCC’s interim final order confirms that federal law preempts the IFPA, expressly providing that national banks and federal thrifts are neither subject to nor required to comply with this state law. The agency said its actions will help prevent “the imminent negative effects” of the Illinois law’s application to OCC-regulated banks. The OCC’s interim final rule also made explicit national banks’ power to charge interchange fees indirectly through payment-card networks.
In today’s order, the Seventh Circuit said: “The district court should address these matters, and any related issues, before this court attempts to do so.” It also canceled oral arguments scheduled for May 13.
The Illinois Bankers Association, Illinois Credit Union League, American Bankers Association and America’s Credit Unions issued a joint statement in response to today’s decision.
“In light of the Seventh Circuit’s order, we welcome the opportunity to resume our legal challenge to the Illinois Interchange Fee Prohibition Act in district court. As we have consistently argued, the Illinois Interchange Fee Prohibition Act conflicts with federal law, and recent regulatory actions only reaffirm that fact,” the trade groups wrote. “The Office of the Comptroller of the Currency’s recent interim final actions directly address the core issues in this case and further strengthen our position that IFPA is preempted by federal law.
With the law scheduled to take effect in Illinois on July 1, the associations called it “critically important” for all parties to reach “a timely resolution to provide certainty for consumers, businesses and financial institutions.”
“Even better would be for the Illinois legislature to recognize that IFPA was a mistake and repeal this misguided law, sparing Illinois consumers and businesses from payment chaos and confusion,” the groups said.
