Illinois Interchange Fee Ban Sparks Legal Battle as OCC and Banks Push Back

Illinois in 2024 passed the nation's first Interchange Fee Prohibition Act, barring banks from charging interchange fees on state and local taxes and tips included in credit- and debit-card transactions. Merchants typically pay about 1%–2% per transaction. Banks and retailers estimate the law could affect $120 million–$200 million in annual revenue, igniting a dispute over states' rights and federal preemption under the National Bank Act.

The Office of the Comptroller of the Currency issued an order on April 24, 2026, finding that federal law preempted the Illinois statute. On June 1, federal Judge Virginia Kendall permanently barred the state from enforcing the law against national banks, federal savings associations, protected out-of-state banks and payment networks in a lawsuit brought by the American Bankers Association and others. That same day, state lawmakers delayed the measure for another year, moving its effective date to July 1, 2027.