Federal agency opposes new Illinois law on credit card 'interchange fees'

SPRINGFIELD — After a coalition of financial institutions sued over the law in federal court this summer, federal officials this week sided with the banks. The Office of the Comptroller of the Currency — an independent bureau within the U.S. Department of Treasury — wrote in a legal brief that Illinois' law is both "bad policy" and in conflict with federal law.

The filing, published Wednesday, frames interchange fees as a "core feature of an intricately designed nationwide payments system."

"The Illinois Interchange Fee Prohibition Act is an ill-conceived, highly unusual, and largely unworkable state law that threatens to fragment and disrupt this efficient and effective system," the brief said. "Although the IFPA's requirements are vague and ambiguous in many respects, this much is clear: the IFPA prevents or significantly interferes with federally-authorized banking powers that are fundamental to safe and sound banking and disrupts core functionalities that drive the Nation's economy."

The law, which Gov. JB Pritzker and Democrats in the General Assembly approved as part of the state's budget process earlier this year, was a concession to the Illinois Retail Merchants Association. Retailers had been opposed to the governor's proposed cap on a tax deduction historically granted to them for collecting the state sales tax.

IRMA leaders defended the law last week, while Pritzker on Thursday said the Biden administration's filing was "not something that I'm deeply concerned about."

"When things get brought to court, you never know how they'll turn out," he said at an unrelated event. "I think this one is one that can be defended well and we'll end up with the law we have on the books being affirmed."

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