On June 1, 2026, the Northern District of Illinois materially altered its prior ruling on the Illinois Interchange Fee Prohibition Act (IFPA), preventing the law’s interchange fee restrictions from applying to key participants in the payment system. See our prior Client Alert on this case. This decision follows intervening regulatory action by the Office of the Comptroller of the Currency (OCC) and comes as the IFPA’s effective date remains in flux.

The Court reaffirmed its initial preemption determination for the IFPA’s prohibition on collecting interchange fees on sales taxes, excise taxes, and gratuities (where merchants provide the relevant data). Now, the Court has blocked enforcement of the IFPA as to national banks, federal savings associations, and out-of-state state-chartered banks, as well as payment card networks such as Visa and Mastercard. Payment card networks were excluded from the preliminary injunction.

After the Court upheld the IFPA’s interchange prohibitions against all financial institutions in February (relying on the fact that payment card networks not the financial institutions, set the interchange fees), the plaintiffs appealed the decision to the Seventh Circuit. The case was briefed and scheduled for a May hearing before the Seventh Circuit; however, the Seventh Circuit remanded the case back to the lower court in light of the OCC’s recent regulatory action.

The Court’s reversal stems from the OCC’s April 2026 interim final rule, which expanded national banks’ authority to receive non-interest fees indirectly through intermediaries, including payment card networks. The Court found that, in light of this regulatory change, the IFPA now “significantly interferes” with national banks’ exercise of their federally authorized powers, thereby triggering federal preemption under the National Bank Act. The Court concluded that the IFPA would require a restructuring of how interchange fees are assessed and collected, imposing an undue burden on bank operations and the broader payments ecosystem.

In extending relief to payment card networks, the Court recognized that effective preemption must reach entities that are integral to the exercise of national banks’ powers, including those that set interchange rates on behalf of issuing banks. As a result, the interchange fee restrictions are effectively inoperative for the majority of large financial institutions and core payment system participants.

The Court did not disturb its earlier holding with respect to entities not covered by federal banking preemption. Accordingly, federal credit unions, Illinois-chartered banks, and other non-bank actors remain subject to the interchange fee restrictions, leaving a fragmented compliance framework for those card issuers still within the scope of the statute.

With respect to the Data Usage Limitation, the Court reaffirmed its prior decision in full, continuing to hold that the provision is preempted and invalid as applied to national banks, federal savings associations, federal credit unions, out-of-state banks, and other participants (including processors and networks) to the extent they facilitate those entities’ operations. The Court again emphasized that federal law provides broad authority for financial institutions to process and use transaction data, and that the IFPA’s restrictions directly conflict with those powers.

Procedurally, the Court also addressed the OCC’s separate interim order purporting to preempt the IFPA, concluding that while the agency’s position is entitled to consideration, it is not dispositive and does not displace the Court’s independent obligation to resolve the preemption question. The Court ultimately found the OCC’s rulemaking—rather than its adjudicatory order—to be the more relevant development affecting the outcome.

Separately, the Illinois legislature has passed a bill that, if signed, would delay the IFPA’s effective date to July 1, 2027, further clouding the timing and ultimate implementation of the law.

In practice, most major card issuers and payment networks are no longer subject to the IFPA. Credit unions and Illinois-chartered banks, however, must still comply and may face operational challenges without a uniform industry-wide process.

Winthrop will continue to monitor developments, including any appeal to the Seventh Circuit and further federal regulatory action.

June 9, 2026