Illinois Court Extends Preemption of IFPA to Federal Credit Unions

September 28, 2026 - 19:35

A recent decision from the U.S. District Court for the Northern District of Illinois has broadened the scope of federal preemption regarding the Illinois Interchange Fee Prohibition Act, extending its reach to include federal credit unions. The ruling, issued on September 22, builds on earlier conclusions that the state law conflicts with federal banking regulations.

The case centers on the Illinois Interchange Fee Prohibition Act, which sought to restrict how banks and credit unions could charge interchange fees on certain transactions, particularly those involving tax and gratuity payments. Financial institutions argued that the state law interfered with federally regulated banking powers. The court previously agreed, finding that the National Bank Act preempts the Illinois statute for national banks.

Now, the same logic applies to federal credit unions. The court determined that the Federal Credit Union Act provides similar preemptive protection, shielding federal credit unions from the state's interchange fee restrictions. This means federal credit unions operating in Illinois can continue their practices without complying with the state law's prohibitions.

Industry groups welcomed the decision, noting it brings consistency to how federal financial institutions are treated under state law. Consumer advocates, however, expressed concern that the ruling could limit protections intended to reduce costs for merchants and consumers. The case is likely to influence similar disputes in other states considering comparable interchange fee legislation.