On June 16, the U.S. District Court for the Northern District of Illinois ordered additional briefing on whether the NCUA’s June 9 interim final rule (previously covered by InfoBytes here) warrants reconsideration of the court’s prior holding that the Federal Credit Union Act (FCUA) does not preempt the Illinois Interchange Fee Prohibition Act’s (IFPA’s) interchange fee provisions as applied to federal credit unions (FCUs). The court directed the parties to address threshold issues comparable to those analyzed in the June 1 ruling (covered by InfoBytes here), which enjoined enforcement of the Illinois interchange fee ban as to national banks, federal savings associations and out-of-state state banks, but left the preemption analysis for FCUs unchanged from the court’s February 10 summary judgment ruling (covered here).

In their June 22 initial brief and June 29 response addressing the June 1 ruling, the industry plaintiffs argue that the NCUA rule supplied two independent bases for FCUA preemption. First, they argue the rule amended the NCUA’s express preemption regulation to clarify that its scope is “not limited to charges directly to members.” Second, they argue the rule confirmed FCUs’ authority to charge interchange fees “directly or indirectly, through intermediaries, partners, payment networks, interchanges, or other third parties” and to have those fees set by or in consultation with third parties. The plaintiffs contend that the NCUA rule parallels the OCC’s April rule that led the court to enjoin the interchange fee prohibition as applied to national banks (previously covered here) and ask the court to extend similar relief to FCUs and entities that facilitate their receipt of interchange fees. They also argue that challenges to the NCUA’s good-cause finding and notice-and-comment process belong in a separate APA action, not in this preemption case.

In June 22 and June 29 briefs, the Illinois attorney general argues that the NCUA rule is procedurally invalid because the agency bypassed notice-and-comment requirements, does not substantively change the NCUA’s express preemption provision, and exceeds the NCUA’s authority because Congress did not authorize it to preempt state law. The Illinois attorney general also asserts that the court’s prior conflict-preemption analysis remains sound because it assumed FCUs could receive interchange fees yet found the interchange fee prohibition did not conflict with FCU powers to an extent requiring preemption.

In a June 23 brief, merchant amici argue that the court may assess the NCUA rule’s validity before giving it preemptive effect, that the rule was not validly promulgated, and that even a valid rule would not preempt state regulation of interchange fees that are not arrived at on a competitive basis.