The NCUA was praised by credit union trade groups Tuesday for proposing a rule that would defend credit union interchange fee income by saying federal laws preempt state ones.
The NCUA Tuesday submitted a rulemaking to the Office of Information and Regulatory Affairs to confirm that federal law preempts the Illinois Interchange Fee Prohibition Act (IFPA). The rule is expected to publish in the Federal Register soon.
America's Credit Unions President/CEO Scott Simpson thanked NCUA Chair Kyle Hauptman for protecting credit unions "from harmful efforts to change the national payments system."
The NCUA's rulemaking has now been submitted to the White House's Office of Information and Regulatory Affairs (OIRA) for review.
"Paired with the OCC's previous actions, it is clear that state laws cannot encroach against national authorities nor undermine the safety and stability of our national payments system," Simpson said.
Banks and credit unions have been intensifying efforts to challenge Illinois' Interchange Fee Prohibition Act (IFPA), urging both regulators and federal policymakers to act before the law's July 1 implementation.
The Defense Credit Union Council wrote Hauptman April 17, asking that he consider invoking federal preemption as the Office of the Comptroller of the Currency had done in a rule announced April 14.
Jason Stverak, DCUC's chief advocacy officer, said the group "strongly supports" the NCUA's move.
"At a time when states are increasingly pursuing inconsistent and potentially unworkable interchange and payment-related mandates, it is critical that federal credit unions operate under a clear and uniform national framework," Stverak said. "A fragmented, state-by-state approach to interchange regulation and payment processing requirements threatens to increase operational complexity, elevate compliance costs and ultimately harm consumers."
Simpson and AmCU SVP of Advocacy Greg Mesack also met in April with Treasury Deputy Assistant Secretary and NCUA Board nominee John Crews, emphasizing the need for strong federal preemption authority.
The Illinois law would limit interchange fees, which are an important source of revenue for credit unions and banks.
Banks and credit unions said that without federal clarity, the law could increase operational costs and create inconsistencies in the payments system.
Contact Jim DuPlessis at Jim.DuPlessis@arc-network.com.
© Arc, 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.