On September 22, the U.S. District Court for the Northern District of Illinois granted a motion for partial reconsideration and permanently enjoined the state from enforcing the Illinois Interchange Fee Prohibition Act’s interchange fee limitation against federal credit unions (FCUs), bringing them in line with national banks, federal savings associations, out-of-state state banks, and payment card networks who already enjoy the benefit of a permanent injunction under the court’s June ruling (previously covered by InfoBytes here). The court found that the NCUA’s June interim final rule (covered here) — which amended 12 C.F.R. § 701.5(b) and added new § 701.5(c) to clarify that FCUs have authority to charge non-interest charges and fees, including interchange fees, directly or indirectly through third parties — warranted reconsideration of the court’s earlier holding that the Federal Credit Union Act (FCUA) did not preempt the state’s interchange fee ban as applied to FCUs (previously covered by InfoBytes here).

Applying ordinary conflict preemption principles, the court concluded that the NCUA’s new § 701.5(c), which recognizes FCUs’ authority to charge interchange fees through intermediaries, payment networks, and other third parties, established that the state law stood as an obstacle to the accomplishment of the FCUA’s objectives. The court rejected the state attorney general’s arguments that the NCUA rule was procedurally invalid under the APA, reaffirming its prior holding that APA procedural challenges must be brought in a separate action against the agency and that the court’s review was limited to whether the rule carried preemptive effect as a matter of statutory interpretation. The court’s prior permanent injunction against the IFPA’s data usage limitation also remains in full effect.