NCUA headquarters. Credit/NCUA
The NCUA has issued an interim final rule clarifying that federal credit unions have the authority to assess and collect non-interest charges and fees, including interchange fees generated through debit and credit card transactions, a move widely viewed as a direct response to the ongoing battle over Illinois' Interchange Fee Prohibition Act (IFPA).
The rule, which becomes effective June 30, clarifies that the Federal Credit Union Act authorizes federal credit unions to "assess, collect, impose, levy, receive, reserve, take, or otherwise obtain" non-interest charges and fees. It also specifies that those fees remain permissible even when they are established through card networks, payment processors, or other third-party arrangements.
The action is significant because it strengthens the NCUA's position that federal law preempts state efforts to regulate interchange fees charged by federal credit unions. The Illinois law, which remains the subject of ongoing litigation, would prohibit interchange fees from being assessed on portions of transactions attributable to taxes and gratuities.
For credit unions, interchange revenue helps fund fraud prevention systems, cybersecurity investments, rewards programs, digital banking services, and payment infrastructure. Industry advocates have warned that allowing states to impose varying restrictions could create a patchwork regulatory environment that complicates card processing and increases operational costs.
"The NCUA Board is adopting an interim final rule to clarify federal credit unions' power to charge non-interest charges and fees includes the power to assess, collect, impose, levy, receive, reserve, take, or otherwise obtain non-interest charges and fees, including interchange fees from credit and debit card operations," the agency stated.
The Defense Credit Union Council (DCUC) praised the move, with President/CEO Anthony Hernandez calling it "proactive action to provide regulatory clarity" for federal credit unions.
DCUC Chief Advocacy Officer Jason Stverak said the clarification would help credit unions continue investing in fraud prevention, cybersecurity, rewards programs and digital payments while preventing "a patchwork of state interchange mandates."
America's Credit Unions President/CEO Scott Simpson and Illinois Credit Union League President/CEO Libby Calderone said the Illinois law, if implemented, would disrupt the payments system and create confusion for consumers.
"We appreciate Chairman Hauptman and the NCUA for their leadership in preventing a patchwork of state laws by reaffirming that credit unions are exempt from state regulations affecting non-interest charges and fees, including interchange fee prohibitions," Simpson and Calderone said in a joint statement.
The NCUA is accepting public comments on the interim final rule following its publication in the Federal Register.
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