The U.S. Office of the Comptroller of the Currency (OCC) has issued an interim final order concluding the Illinois Interchange Fee Prohibition Act (IFPA) is preempted by the National Bank Act and the Home Owners’ Loan Act. In a new insight, Director of Competition Policy Fred Ashton discusses the potential consequences of the IFPA’s changes to credit card services.

Key points:

• The IFPA, enacted by Illinois in June 2024 and effective on July 1, 2026, prohibits payment-card issuers, networks, acquiring banks, and processors from charging or collecting interchange fees on the gratuity or tax portion of a transaction.
• The IFPA is expected to reduce bank interchange fee revenue while forcing both banks and merchants to absorb higher compliance costs, leaving card issuers to pursue alternative means of collecting lost revenue or cut rewards programs; moreover, the IFPA would reduce the efficiency of the current national payment network.
• The OCC’s preemption of the IFPA is essential to protect the national banking system, remove uncertainty, and avoid driving up operational costs at the expense of consumers.

Read the analysis.