On October 2, the OCC filed an amicus brief supporting several banking associations’ motion for a preliminary injunction against the Illinois Interchange Fee Prohibition Act (IFPA or the Act) in the U.S. District Court for the Northern District of Illinois. As previously covered by InfoBytes, the Governor of Illinois signed into law the IFPA banning credit or debit card issuers and any other entity that facilitates or processes electronic payments from charging an interchange fee on the tax or gratuity of a transaction. Under the IFPA, the Act prohibits banks and others involved in an electronic payment transaction (except the merchant) from transferring or using data from that transaction except to facilitate or process the transaction, or as required by law. Several bank associations quickly challenged this law to prevent its implementation, seeking a preliminary injunction and asking the court to declare the Act preempted, unconstitutional and invalid (covered by InfoBytes here).

The OCC argued the IFPA’s restrictions on interchange fees and data usage significantly interfere with national banks’ federally authorized powers under the National Bank Act (NBA) to process debit and credit card transactions and charge fees for those services. The OCC emphasized the IFPA’s prohibition on charging interchange fees on tax and gratuity portions of transactions and its limitations on the use of transaction data would impose operational burdens on national banks and could disrupt the national payment system. The OCC contended that such state-level restrictions could lead to increased costs, reduced services and weakened fraud protection for consumers, ultimately fragmenting the nationwide payments system.