A federal appeals court on Friday handed credit unions and banks a boost in their attempts to kill an Illinois law that would limit interchange income.
The U.S. Seventh Circuit Court of Appeals ordered U.S. District Judge Virginia M. Kendall to vacate her recent decision to uphold major portions of the Illinois Interchange Fee Prohibition Act against a lawsuit filed by banks.
The appeals court said its order was based on the Comptroller of the Currency's April 29 order saying federal law pre-empted the state law's restrictions.
"The district court should address these matters, and any related issues, before this court attempts to do so. We therefore vacate the judgment of the district court and remand for appropriate further proceedings," the appeals court said.
In a joint statement, America's Credit Unions (AmCU), the Illinois Credit Union League, Illinois Bankers Association and the American Bankers Association said they "welcome the opportunity to resume our legal challenge to the Illinois Interchange Fee Prohibition Act in district court. As we have consistently argued, the Illinois Interchange Fee Prohibition Act conflicts with federal law, and recent regulatory actions only reaffirm that fact."
The Defense Credit Union Council (DCUC) also supported the appeals court order.
"This is a significant and encouraging development for financial institutions, consumers, and the stability of the nation's payments system," Jason Stverak, DCUC's chief advocacy officer, said. "The OCC's recent actions recognize the serious legal, operational and economic concerns created by the Illinois law and reinforce the importance of maintaining a consistent national framework for electronic payments."
Ann Petros, AmCU's vice president of policy engagement and credit union operations, said the order returns credit unions to where they were after the law was passed.
"We're in some ways starting fresh," she said.
The law is scheduled to go into effect July 1. Petros said one immediate issue will be to seek a stay from the district court or a delay from the Illinois legislature.
Contact Jim DuPlessis at Jim.DuPlessis@arc-network.com.
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