Office of the U.S. Attorney for the Northern District of Illinois at Dirksen Federal Building (foreground) in downtown Chicago.
The Illinois Attorney General urged a federal appeals court to uphold key provisions of the state's Interchange Fee Prohibition Act, setting up a high-stakes legal battle with implications for credit unions and the broader payments system.
In a reply brief filed Friday with the U.S. Court of Appeals for the Seventh Circuit, the state defended the law's interchange fee restrictions, arguing they do not "significantly interfere" with federally regulated financial institutions. The brief relies on the legal standard established in Barnett Bank v. Nelson, asserting that inconvenience alone does not trigger federal preemption.
The filing also took direct aim at credit unions, arguing the Federal Credit Union Act does not explicitly preempt such state laws and does not list interchange fee collection as a core power. As a result, the state contends the law has no major impact on federal interests.
Perhaps most notably, Illinois argued that even if preemption applies to financial institutions, it should not extend to payment networks like Visa and Mastercard, an interpretation that could allow states to regulate interchange indirectly.
The state is also seeking to overturn a lower court ruling on data usage provisions, arguing the case lacked standing.
America's Credit Unions and the Illinois Credit Union League are expected to file their response by April 17.
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