The legal battle over the nation’s first pass-through toll law is back in federal district court.
US Court of Appeals for the Seventh Circuit on Friday (May 8) He was evacuated A lower court decided in a challenge to Illinois’ interchange fee ban and remanded the case to the U.S. District Court for the Northern District of Illinois for further proceedings. The move cancels oral arguments that were scheduled for Wednesday (May 13) and returns the case to court just weeks before the law’s July 1 effective date.
The practical meaning is that the card ecosystem is less certain. Banks, credit unions, card networks, processors, acquirers and merchants are now waiting for the district court to reevaluate the case against a changing regulatory backdrop. the Office of the Comptroller of the Currency (OCC) issued interim final actions concluding that federal law preempts IFPA as applied to national banks and federal savings associations. The body of the law would prohibit interchange fees on the tax and tip portions of credit and debit card transactions.
The case stems from a ruling last February by U.S. District Judge Virginia Kendall in Illinois Bankers Association v. Raoul.
Kendall supported basic limits on withdrawal fees, finding that the law does not directly regulate national banks because payment card networks, not banks, set interchange fees. It reached the opposite conclusion about the law’s data use limits, permanently banning those provisions after finding they conflicted with federally authorized bank functions such as fraud monitoring, data processing and loyalty programs. Banking trade groups and credit unions then moved quickly to the 7th Circuit, which fast-tracked the appeal in hopes of a decision before July.
the American Bankers Association, Illinois Bankers Association, American credit unions and Illinois Credit Union Association Remanded in custody As a prelude to pressing their preemption arguments again in district court.
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“As we have consistently said, Illinois’ interchange fee prohibition law conflicts with federal law, and recent regulatory actions only underscore that fact,” the groups said in a joint statement. Banking groups also urged Illinois lawmakers to repeal the law, warning that implementation would create confusion for consumers, businesses and financial institutions.
Next, the district court will have to decide how much weight to give the OCC’s intervening preemption order and related rulemaking. The schedule remains compact: The OCC order takes effect June 30, one day before the IFPA goes into effect.
Whatever the district court does next, it will likely quickly come back to the Seventh Circuit, with implications far beyond Illinois as other states consider similar limits on pass-through fees.
