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On February 10, Chief Judge Virginia M. Kendall of the United States District Court for the Northern District of Illinois issued a Memorandum Opinion and Order resolving cross-motions for summary judgment concerning the Illinois Interchange Fee Prohibition Act. The court granted a permanent injunction blocking enforcement of the Act's data usage limitation, while allowing the interchange fee restriction to take effect July 1, 2026.
In its merits analysis, the court concluded that the data usage limitation directly conflicts with federally authorized banking powers and is therefore preempted under the National Bank Act and related federal statutes. By contrast, the court determined that the interchange fee restriction does not "significantly interfere" with national banking powers under the Supreme Court's Barnett Bank standard because payment card networks, rather than banks themselves, establish interchange fee schedules. The court described the matter as a close case involving a first-of-its-kind state intervention into payment card transactions.
Key aspects of the court's decision include:
- Data usage limitation preempted. The court held that restricting transaction data use beyond facilitating or processing a payment substantially interferes with federally protected powers of national banks, federal savings associations, federal credit unions, and certain out-of-state state banks.
- Interchange fee limitation upheld. The court concluded that prohibiting interchange fees on the tax and gratuity portions of transactions does not rise to the level of significant interference required for preemption.
- Effective date remains July 1, 2026. The General Assembly previously extended the implementation date, and institutions must prepare for compliance with the interchange fee restriction.
Putting It Into Practice:The Illinois Interchange Fee Prohibition Act (previously discussed here, here and here) has now been partially enjoined, with the court blocking enforcement of the data usage limitation while allowing the interchange fee restriction to take effect. Financial institutions and payment system participants should continue preparing for the July 1, 2026 effective date, particularly with respect to calculating interchange fees on transactions net of state and local taxes and gratuities.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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