CHICAGO — In a closely watched ruling issued Tuesday, Chief U.S. District Judge Virginia M. Kendall delivered a split decision on Illinois’ Interchange Fee Prohibition Act (IFPA), dealing credit unions both a partial win and a continuing compliance risk as the state’s novel swipe-fee law moves closer to its July 1, 2026 effective date.
Sitting in the U.S. District Court for the Northern District of Illinois (Eastern Division), Kendall resolved the parties’ cross-motions for summary judgment — a merits decision that is final at the district-court level, though almost certain to be appealed to the Seventh Circuit.
In a 47-page Memorandum Opinion & Order, Kendall refused to permanently block the heart of the statute — the Interchange Fee Provision, which bars issuers from collecting interchange on the tax and gratuity portions of card transactions. At the same time, she permanently enjoined the law’s separate Data Usage Limitation, finding it preempted by federal banking law. The mixed outcome leaves the IFPA alive, but narrower, and keeps uncertainty high for credit unions that issue cards in or into Illinois.
For credit unions, the practical bottom line is uneven. Kendall again declined to extend federal preemption to federal credit unions under the Federal Credit Union Act — meaning they remain exposed to the interchange restrictions unless an appellate court says otherwise.
Co-plaintiffs—the American Bankers Association, Illinois Bankers Association, America’s Credit Unions and Illinois Credit Union League responded.
"We are deeply disappointed by today’s ruling, and given the July 1 implementation date of the Illinois Interchange Fee Prohibition Act, we will appeal this decision. As the co-plaintiffs demonstrated and the OCC agreed, IFPA is clearly and fully preempted by federal law. The decision not to protect the payment system from this misguided state law is a serious error that will unleash chaos and confusion on Illinois consumers and businesses. We cannot let that stand.
“In light of this outcome, we renew our call for state lawmakers to repeal this flawed law before it can do any more harm to the Illinois economy. The fight over IFPA and any similar proposal will continue."
The Defense Credit Union Council reacted, sharing concerns.
“Today’s ruling allows Illinois’ interchange statute to proceed as applied to financial institutions, and while we respect the court’s decision, it underscores a deeply troubling policy direction that puts credit unions — and the servicemembers, veterans, and military families they serve — at a disadvantage,” stated Defense Credit Union Council Chief Advocacy Officer Jason Stverak.
He noted that credit unions are not-for-profit, member-owned financial cooperatives that rely on interchange revenue to fund fraud prevention, cybersecurity, rewards programs, and low-cost access to credit.
“Allowing state-by-state erosion of interchange threatens the very infrastructure that enables credit unions to serve communities, including those on military installations and in underserved areas,” he said. “DCUC continues to push for legislation and regulations that recognizes the unique role credit unions play in serving those who serve our nation — and that prevents unintended harm to consumers, small institutions, and national security communities.”