Coalition Letter Supporting Preemption of the Misguided Illinois Interchange Fee Prohibition Act

Dear Comptroller Gould, 

On behalf of our organizations and the members they represent, we write to support your office’s moves to preempt the Illinois Interchange Fee Prohibition Act under federal law, as well as the Constitution’s Supremacy Clause and Commerce Clause. 

The Illinois Interchange Fee Prohibition Act (IFPA) represents an existential threat to the smooth operation of the national banking system. By requiring banks to separate out sales taxes and gratuities from each transaction for interchange fee calculations, the law imposes a substantial burden on day-to-day operations of smaller banks and credit unions. Credit unions in particular have indicated the cost burden may compel them to stop offering payment cards to their members in Illinois. 

Another problem is that the law could encourage other states to pass similar laws, creating a patchwork of interchange fee regulations and leading to the end of the national payments system as we know it.  

State restrictions are contrary to both the letter and spirit of federal law. The National Bank Act was established to facilitate a “national banking system.” In the controlling case, Barnett Bank of Marion County, N.A. v. Nelson, the Supreme Court established the governing rule that states may not “prevent or significantly interfere with” a national bank’s exercise of its federally authorized powers. Your office is charged with administering that law and others relating to the banking system. 

Your office has the responsibility under the National Bank Act to authorize banks to engage in payment processing and to charge for that service. The IFPA significantly interferes with that authorization and is therefore in breach of the Supremacy Clause of the Constitution. 

That, however, is not the only constitutional affront inherent in the IFPA. As your office said in its brief of amicus curiae in the current case Illinois Bankers Association v. Raoul challenging the IFPA, “National banks play a vital role in processing credit and debit transactions, which are essential to the functioning of the Nation’s economy.” These banks represent a vital conduit in the conduct of commerce across the United States. The IFPA disrupts that conduct.  

The Constitution gives Congress the power “to regulate commerce…across the several states.” It exercised that power in the National Bank Act. Your preemption of the IFPA is therefore clearly justified under the Commerce Clause as well. 

We commend you for your actions and support their issuance. 

For a full list of signatories, see the original letter below: