CHICAGO—The Illinois General Assembly has given financial institutions a significant reprieve in the ongoing battle over interchange fees, approving legislation that delays implementation of key provisions of the Illinois Interchange Fee Prohibition Act (IFPA) by one year, pushing the effective date to July 1, 2027.
The provision was included in a broad end-of-session regulatory package as part of an amendment to SB 3645, which won approval before lawmakers adjourned their spring session early Monday morning. The measure received backing from key House and Senate leaders and provides additional time as litigation over the law continues and federal regulators pursue actions that could ultimately preempt portions of the statute.
The legislation now moves to the desk of Governor JB Pritzker, who is expected to sign the bill.
The move comes as financial institutions, credit unions and banking trade groups continue a multi-front effort to block the law, which would prohibit interchange fees from being collected on the tax and gratuity portions of card transactions. As CUToday.info previously reported, the Office of the Comptroller of the Currency recently issued both an interim final rule and a formal order concluding the Illinois law is preempted with respect to national banks, arguing the measure unlawfully interferes with federally authorized banking powers and the nation's payments system.
NCUA has since followed with its own proposal that would provide similar protections for federally insured credit unions. The NCUA proposal would clarify that state laws seeking to restrict or limit interchange fee practices are preempted when they conflict with federal credit union authorities, a move widely viewed as extending to credit unions the same type of regulatory shield the OCC has asserted for national banks.
The legal fight also remains active. America’s Credit Unions, the Illinois Credit Union League, American Bankers Association and other industry groups continue to challenge the IFPA in federal court, while supporters of the law have argued it is necessary to reduce costs for merchants.
The latest legislative development comes just days after both America’s Credit Unions and the Defense Credit Union Council filed letters supporting the OCC’s actions. In separate comments submitted Friday, the groups praised the agency for affirming national banks’ authority to collect interchange fees and for concluding that the Illinois law is preempted by federal law, while urging regulators to preserve a nationally uniform payments system.
DCUC Reacts To Delay
“The Illinois General Assembly’s decision to delay implementation of the Interchange Fee Prohibition Act for an additional year provides important breathing room for credit unions, consumers, merchants and regulators to continue evaluating the significant operational, legal and financial challenges posed by this law,” DCUC Chief Advocacy Officer Jason Stverak told CUToday.info.
While this extension is a positive development, Stverak said it does not resolve the fundamental problems created by the IFPA.
“DCUC remains deeply concerned that state-specific interchange mandates threaten to fragment the national payments system, increase compliance costs, undermine fraud prevention efforts, and ultimately reduce services and benefits for consumers. Service members, veterans, and military families depend on a secure, reliable, and uniform payments infrastructure regardless of where they are stationed or deployed,” he explained.
“The growing recognition by lawmakers, regulators, and stakeholders that additional time is needed underscores what DCUC has consistently argued: this law is far more complex than its proponents suggest. We continue to believe the best solution is full repeal of the IFPA and rejection of similar interchange mandates in other states,” continued Stverak. “DCUC will remain actively engaged with policymakers and regulators to ensure credit unions can continue providing affordable financial services, strong fraud protections, and uninterrupted payment access to the more than 40 million members served by defense credit unions nationwide.”
Washington credit union advocate John McKechnie addressed the decision.
“To paraphrase Churchill, the Illinois legislature finally did the right thing after exhausting all other possibilities,” said McKechnie. “This delay may be a sign that they realize they have made a mess of the interchange fee issue since 2024, and they are buying time to figure out how to fix it. At least that’s what I hope is going on.”
ACU, ABA, IBA And ICUL Respond
"We welcome the Illinois General Assembly's decision to once again delay the IFPA implementation deadline for another year. This reasonable step will protect Illinois businesses and consumers from facing payment chaos in just a month, without interrupting our ongoing legal challenge to IFPA. We remain confident in the strength of our case and look forward to securing permanent relief from this misguided law," stated America's Credit Unions, the American Bankers Association, the Illinois Bankers Association and the Illinois Credit Union League in a joint release.
ICUL Applauds Decision
“Credit unions strongly support efforts to protect consumers and maintain a safe, reliable, and efficient payments system,” said Libby Calderone, president and CEO of the Illinois Credit Union League. “This extension provides much-needed certainty to preserve the strength and integrity of the electronic payments infrastructure that Illinois families depend on every day. A fragmented payment system would create unnecessary costs, confusion, and risk for consumers, businesses, and financial institutions alike.”
The league expressed appreciation to legislative leaders who worked to secure passage of the extension and "prevent unnecessary disruption to consumers and financial institutions across the state."
“We are grateful to House Speaker Welch and Senate President Harmon for their leadership and support in advancing this important extension,” said Ashley Sharp, chief legal officer and SVP of State Advocacy for ICUL. “Their commitment to ensuring Illinois consumers continue to benefit from a secure and dependable payment system has been instrumental. This extension provides policymakers and stakeholders the opportunity to continue evaluating the significant legal, operational, and consumer implications associated with the law.”