Illinois Interchange Fight Signals Broader Risk for Credit Unions Nationwide

Earlier this month, America’s Credit Unions, alongside the Illinois Credit Union League and other industry partners, filed a brief with the U.S. Court of Appeals urging reversal of a lower court decision related to the Illinois Interchange Fee Prohibition Act (IFPA). The coalition is seeking a permanent injunction before the law’s July 1 implementation date.

At the heart of the issue: the IFPA would prohibit financial institutions from collecting interchange on the tax and gratuity portions of card transactions in Illinois. While this may appear narrow, the impact is anything but. Any credit union whose members transact in Illinois would be affected, regardless of where the institution is headquartered.

From Cornerstone’s perspective, this is not just an Illinois issue; it is a precedent-setting moment.

The legal brief underscores a core concern: federal law does not permit states to significantly interfere with the operations of federally regulated financial institutions. It also warns that provisions like the IFPA’s data usage limitations could expose credit unions to liability for routine activities such as fraud prevention and rewards program administration.

The potential consequences extend well beyond compliance complexity. A patchwork of state-level interchange rules would introduce operational uncertainty, increase costs, and ultimately impact the affordability and accessibility of financial services for members.

Federal regulators are now weighing in. The Office of the Comptroller of the Currency is expected to issue rules affirming federal preemption over laws like the IFPA, an effort aimed at preserving consistency in how financial institutions operate across state lines.

This aligns with what we know to be true: payments operate as a national and global system. Disruptions in one state do not stay contained. As Richard Hunt, executive chairman of the Electronic Payments Coalition, noted, differing state rules are “a recipe for chaos” that could ripple across the entire payments ecosystem.

Cornerstone continues to work in close coordination with national partners and the league system to monitor developments and advocate for a unified, workable framework. The stakes are clear. This is about more than interchange – it is about protecting a system that enables credit unions to serve members efficiently, securely, and at scale.

We will continue to keep you informed as this situation evolves, and as always, we stand ready to engage.