Credit unions, Leagues and America’s Credit Unions have been closely monitoring the legal challenges surrounding Illinois’ Interchange Fee Prohibition Act (IFPA) which exempts interchange on sales tax and gratuity. A similar bill was introduced in Maryland a few weeks ago, and one is expected to be reintroduced in the District of Columbia soon.

Latest developments
A federal court in Illinois issued a preliminary injunction in December for federally chartered banks. However, last Thursday, the court declined to extend the injunction to credit unions and state-chartered banks. The case remains ongoing with the next hearing scheduled for March 6.

Credit unions’ legal challenge
In legal briefs submitted by America’s Credit Unions and the Illinois Credit Union League, the industry argued that the Federal Credit Union Act (FCUA) grants the NCUA control over loan terms, repayment conditions and credit card transactions for federal credit unions. They asserted that the IFPA interferes with this federal authority by imposing state-level regulations on credit card transactions. 

However, the court determined that the FCUA does not preempt all state laws related to credit cards — only those that directly regulate credit unions’ relationships with their members. As a result, the IFPA does not directly conflict with the FCUA, as the FCUA only expressly preempts certain aspects of credit union operations.

What this means for credit unions:
Until the case is fully decided, all credit unions—whether based in Illinois or other states but operating there—must follow the IFPA. This also applies to credit card companies. While a temporary pause would have helped, the case is still ongoing, and final decisions can take years. In the meantime, credit unions and card companies must figure out how to comply with the law, which takes effect July 1, 2025. 

Similar bills in Maryland and DC
A similar bill was introduced in the Maryland General Assembly this year. The Association testified last month in opposition to HB29 and will be testifying on the companion bill, SB917, on March 6, 2025. We continue to work closely with stakeholders to make the case that the legislation would benefit large retailers while harming small businesses and consumers – and emphasize the essential role interchange fees play in supporting fraud prevention and secure payment systems. A similar proposal by the DC Council was defeated in 2023, but is expected to be reintroduced.

If you have any questions, please reach out to our VP of Advocacy, Rory Murray at Rmurray@mddccua.org