America’s Credit Unions and Illinois Credit Union League Prepare Responsive Brief

The Illinois Attorney General has filed a reply brief in the U.S. Court of Appeals for the Seventh Circuit seeking to uphold a lower court decision regarding the Interchange Fee Prohibition Act (IFPA). The filing, dated April 4, 2026, argues for the maintenance of the law’s interchange fee provisions while seeking to reverse the decision on data use provisions.

The IFPA prohibits financial institutions, including credit unions and payment networks, from charging or receiving interchange fees in Illinois on the portion of a debit or credit card transaction that is attributable to tax or gratuity. The law is scheduled to go into effect on July 1, 2026.

Legal Arguments on Federal Preemption

In the reply brief, the Illinois Attorney General argues that the IFPA’s interchange fee provision does not significantly interfere with federal powers. The argument cites the standard from Barnett Bank of Marion County, N.A. V. Nelson, asserting that the law creates more than a mere inconvenience for federally regulated entities.

The Attorney General further contends that the National Bank Act preemption standard does not apply to federal credit unions. The brief asserts that the Federal Credit Union Act does not contain an express preemption clause and does not list the collection of interchange fees set by payment card networks on tax and gratuity as a core power of federal credit unions.

The state’s legal position also addresses the role of payment card networks such as Visa and Mastercard. The Attorney General argues that even if the interchange fee provision were preempted for financial institutions, that preemption should not extend to the networks. The brief references the National Bank Act’s language regarding any subsidiary, affiliate, or agent of a national bank to argue that preemption does not flow downstream to the networks that set and enforce the fees.

Industry Opposition and Appeals

America’s Credit Unions, the Illinois Credit Union League (ICUL), and other banking organizations are challenging the law. These groups have previously argued that the IFPA is preempted by federal law and would illegally restrict how financial institutions receive compensation for banking services.

Industry representatives have claimed the law will create a fragmented payment system. In an advertisement published in a special edition of USA Today on March 23, 2026, the ICUL and America’s Credit Unions stated the law would make the state’s payment system more complicated than the rest of the country.

The Electronic Payments Coalition (EPC) is currently conducting a multimillion-dollar advertising campaign to urge state lawmakers to repeal the IFPA. The Office of the Comptroller of the Currency and the EPC submitted amicus briefs in support of the appeal to overturn the law.

Timeline and Next Steps

The legal battle follows a February 12, 2026, decision by a judge that largely upheld the Illinois interchange law. Prior to that, on May 9, 2025, credit union groups filed a reply brief in support of a motion for summary judgment, arguing that federal law protects federal credit unions and out-of-state institutions from the IFPA.

Following the Illinois Attorney General’s April 4, 2026, filing, America’s Credit Unions and the Illinois Credit Union League are preparing a reply and responsive brief, which is due by April 17, 2026.

The outcome of these appellate proceedings will determine if the IFPA’s restrictions on interchange fees for taxes and gratuities will be enforced when the law takes effect on July 1, 2026.