Federal Credit Unions Exempt From Illinois Swipe Fee Law

A U.S. District Court ruled on Tuesday, September 22, that federal credit unions cannot be forced to comply with the Illinois Interchange Fee Prohibition Act (IFPA). The ruling extends a permanent injunction previously applied to other federally chartered financial institutions and payment networks, according to a press release from the lawsuit's plaintiffs.

The plaintiffs include the Illinois Bankers Association, the Illinois Credit Union League, the American Bankers Association, and America’s Credit Unions. In a joint statement, they argued the court's order means only certain state-chartered institutions, particularly those chartered in Illinois, must follow the law when it takes effect. State lawmakers should do the responsible thing and finally repeal IFPA in full and spare Illinois consumers and businesses from the payment chaos it would create, the groups said.

The Law and Its Challenges

The IFPA prevents banks and credit card companies from charging interchange fees, commonly called swipe fees, on the sales tax and tip portions of card transactions. Illinois Governor J.B. Pritzker signed the law in June 2024, but it was quickly challenged in court by the four financial industry groups.

The law's effective date has been pushed back multiple times by the state legislature. It was originally set for July 1, 2025, then delayed to July 1, 2026, and most recently postponed again to July 1, 2027.

A Series of Legal Rulings

This week's decision builds on a previous ruling from the same court on June 1 of this year. At that time, the court found the IFPA could not be applied to national banks, federal savings associations, payment networks, and certain other providers. The plaintiffs hailed that earlier decision as a critical move to maintain a consistent national system for electronic payments.

"Electronic payments rely on a highly interconnected network that requires a uniform national standard," the groups stated in their June 1 joint statement. The latest ruling explicitly brings federal credit unions under the same protective umbrella, shielding them from the state law's requirements.

What Happens Next

With the court's injunction now covering federal credit unions, the scope of the IFPA is significantly narrowed. When it eventually takes effect in July 2027, compliance will fall primarily on state-chartered banks and credit unions operating within Illinois. The plaintiffs continue to press for a full repeal of the law by the state legislature, framing it as a necessary step to avoid disruption for local businesses and consumers. The legal and legislative battles over swipe fees in Illinois are set to continue for the foreseeable future.