OCC Asserts Federal Preemption Over Illinois Interchange Fee Law

On April 24, the OCC announced an interim final rule and a related interim final order clarifying national banks’ authority to charge non-interest fees and concluding that federal law preempts the embattled Illinois Interchange Fee Prohibition Act (IFPA). The OCC’s interim final rule and order rely on the National Bank Act and related federal banking statutes governing national bank powers.

The OCC’s rule and order respond to uncertainty created by recent litigation interpreting the IFPA (previously discussed here). In February, Chief Judge Virginia M. Kendall of the U.S. District Court for the Northern District of Illinois enjoined the IFPA’s data usage limitation but allowed the interchange fee restriction to take effect, holding that the restriction did not significantly interfere with national bank powers because payment card networks, rather than banks, establish interchange fee schedules. The case is now on appeal before the Seventh Circuit, where briefing is expected to