ALEXANDRIA, Va.—NCUA is expected to move soon to challenge Illinois’ Interchange Fee Prohibition Act in a way that parallels action already underway at the Office of the Comptroller of the Currency, according to a new Capitol Account report citing sources familiar with the matter.
The Illinois law, set to take effect July 1, bans swipe fees on taxes and tips.
Capitol Account, citing a source familiar with the matter, said NCUA’s decision was made on April 14, the same day the OCC’s intentions to preempt the statute were disclosed on the OMB’s website. The news outlet said a move by NCUA could come soon.
Capitol Account noted NCUA has different legal authorities than the OCC, so the details of the two agencies’ efforts may differ.
“But the goal is to send a strong signal – to judges and Illinois lawmakers – that the two regulators see the policy as conflicting with federal law,” Capitol Account said.
The OCC submitted two items to OMB – one order preempting Illinois’ Interchange Fee Prohibition Act and a second “interim final rule” that would revise an OCC regulation governing interchange fees charged by national banks, Capitol Account said.
“Further details haven’t yet been revealed. Merchant groups are lobbying the White House to try to stop the OCC notices from formally being issued, Capitol Account said.
CUToday.info reported the OCC’s action on April 16, and the Defense Credit Union Council immediately sent a letter to NCUA.
“While we’re seeing the Office of the Comptroller of the Currency take decisive action to provide regulatory clarity and protect the integrity of the payments system, credit unions deserve the same level of consideration from the National Credit Union Administration,” DCUC Chief Advocacy Officer Jason Stverak stated in the previous CUToday.info report. “The NCUA should evaluate whether it has similar authorities to ensure that a patchwork of state-level interchange policies does not disrupt credit unions’ ability to serve their members especially servicemembers and their families who rely on stable, efficient payment systems. Parity in regulatory treatment isn’t just appropriate, it’s necessary to maintain fairness and consistency across the financial services landscape.”
DCUC’s letter urged NCUA to determine, “as promptly as practicable, whether it possesses authority comparable to that being asserted by the Office of the Comptroller of the Currency with respect to the Illinois Interchange Fee Prohibition Act and, if so, to exercise that authority in a way that reduces regulatory uncertainty for credit unions.”
“From the outset, DCUC has been clear: Illinois’ Interchange Fee Prohibition Act is not just bad policy and it is a direct threat to the stability and uniformity of the nation’s payments system,” Stverak stated Monday night. “By attempting to carve out taxes and tips from interchange fees, the law introduces operational chaos, undermines longstanding federal frameworks, and creates an unworkable patchwork of state-by-state mandates.
“We urged the NCUA to act the same day the Office of the Comptroller of the Currency signaled its intent to preempt this law and today’s possible development shows that message was heard. Federal regulators must speak with clarity and consistency when state actions conflict with national financial infrastructure,” concluded Stverak.
America’s Credit Unions stated Monday it is hoping NCUA will follow the OCC’s lead, arguing the agency already has authority under the Federal Credit Union Act to preempt the state’s Interchange Fee Prohibition Act for federal credit unions.
CUToday.info has reached out to NCUA for comment.