The state legislature passed the Illinois Interchange Fee Prohibition Act (“the Act”) to take effect on July 1, 2025. The bankers association objected to two provisions of the Act: the prohibition of interchange fees and the limitation of data usage. The interchange fee prohibited banks from charging or receiving interchange fees on state or local taxes and gratuity, and the data usage element limited nonmerchant entities from using data except to process transactions or to fulfill legal requirements. The bankers’ association sought a pre-enforcement injunction from enforcement because of the immense burden of compliance and preemption by three federal statutes: “(i) the National Bank Act (“NBA”), (ii) the Homeowners Credit Loan Act (“HOLA”), and (iii) the Federal Credit Union Act (“FCUA”).” Conversely, the State moved to dismiss, arguing that the bankers’ association lacked standing and that the State has sovereign immunity.
In Ill. Bankers Ass’n v. Raoul, No. 24 C 7307, 2024 WL 5186840, 2024 U.S. Dist. LEXIS 230650 (N.D. Ill. Dec. 20, 2024) (opinion not yet released for publication), the court granted the preliminary injunction for national banks and federal savings association regulated by the NBA and the HOLA. First, the court addressed the State’s motion to dismiss. The State argued that the bankers’ association lacked standing to challenge the interchange fee prohibition because the state Attorney General did not have the authority to enforce the Act, and regardless, the alleged injury would not be redressed by an injunction. The court disagreed, finding that not only did the Attorney General have the authority but had the “duty to enforce both provisions.” Further, the court found that members of the bankers’ association had suffered “injury-in-fact” after the passage of the Act. Therefore, the court dismissed the State’s motion to dismiss for lack of standing. However, the court did dismiss the bankers’ association’s state law claims because the State had not waived sovereign immunity for those claims. Second, the court considered the bankers’ association’s motion for a preliminary injunction. The court noted that the bankers’ association needed to demonstrate “(1) ‘that [they] [are] likely to succeed on the merits,’ (2) ‘that [they] [are] likely to suffer irreparable harm in the absence of preliminary relief,’ (3) “that the balance of equities tips in [their] favor, and’ (4) ‘that an injunction is in the public interest.’” Halczenko v. Ascension Health, Inc., 37 F.4th 1321, 1324 (7th Cir. 2022) (quoting Winter v. Nat. Res. Def. Council, Inc., 555 U.S. 7, 24 (2008)). The court held that the NBA “likely preempted” both provisions of the Act because the bankers’ association had made a sufficient showing that the Act “significantly interferes” with national banking laws. 12 U.S.C. § 25b(b)(1)(B). The court also found that the bankers’ association demonstrated they were “likely to prevail” for the same reasons the NBA preempted the Act. For the FCUA, the court concluded that neither party explained whether the Federal Credit Union Act established a private right of action for these claims, so it refrained from ruling on that issue pending supplemental briefing. Third, the court found that the bankers’ association had proven that “irreparable injury” would occur without the injunction. Finally, the court found that “the balance of equities and public interest considerations weighs in favor of [the bankers association],” partly because the preliminary injunction prevents financial institutions from being driven out of the market. Ultimately, the court granted the preliminary injunction under the NBA and HOLA.
By Taylor O’Brien: [email protected]
Edited By Hayden Mariott: [email protected]
Edited By Ashley Boyce: [email protected]