securities lawsuit
Major banking and credit union trade groups said they will appeal a federal court ruling that allowed Illinois' Interchange Fee Prohibition Act (IFPA) to move forward, warning the law could create widespread disruption for consumers, merchants and financial institutions.
In a joint statement issued Tuesday, the American Bankers Association, Illinois Bankers Association, America's Credit Unions and Illinois Credit Union League said they were "deeply disappointed" by the U.S. District Court's decision and confirmed plans to appeal ahead of the law's July 1 implementation date.
The Illinois law will restrict interchange fees on portions of debit and credit card transactions related to state and local taxes and certain fees.
Industry groups argued the measure is preempted by federal law and would force payment networks and financial institutions to separate taxable and non-taxable components of transactions in real time, something they say current systems are not designed to do.
"As the co-plaintiffs demonstrated and the OCC agreed, IFPA is clearly and fully preempted by federal law," the groups said, referring to the Office of the Comptroller of the Currency's position in the case. "The decision not to protect the payment system from this misguided state law is a serious error that will unleash chaos and confusion on Illinois consumers and businesses."
The plaintiffs warned the ruling could open the door to similar state-level laws, fragmenting the national payments system and increasing operational costs and risks, particularly for community banks and credit unions.
In addition to pursuing an appeal, the organizations renewed their call for Illinois lawmakers to repeal the law before it takes effect.
"The fight over IFPA and any similar proposal will continue," the groups said, signaling a larger battle over interchange regulation that extends well beyond Illinois.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.