Banking and Finance Law Daily Wrap Up, STATE BANKING LAWS—D.D.C.: Merchant groups challenge OCC, NCUA actions to thwart Illinois swipe fee law, (Nov 13, 2026)

By Justin Marcus Smith, J.D.

The merchants said OCC and NCUA overstepped their legal authority and violated procedure in adopting interim rules standing for the proposition that federal law preempted Illinois’ law banning credit and debit card swipe fees on sales tax and tips.

A group of national and Illinois merchant trade associations has filed a pair of lawsuits challenging Office of the Comptroller of the Currency (OCC) and National Credit Union Administration (NCUA) actions in connection with the Illinois Interchange Fee Prohibition Act (IFPA). The merchant groups filed the twin complaints in the federal district court in Washington, D.C. IFPA is a first-in-the-nation law banning credit and debit card swipe fees on sales tax and tips. The OCC and NCUA are attempting to block IFPA from taking effect, but the merchants argue OCC and NCUA actions will leave consumers “stuck with the bill for interchange fees while the issuing banks receive immense profits.” IFPA was set to take effect July 1, but legal challenges have delayed it for a year. The merchants’ complaint against the OCC said the OCC interim rule and order exceeded OCC authority under the National Bank Act (NBA) in attempting to regulate card networks, rather than banks, and questioned whether OCC had followed Administrative Procedure Act (APA) notice and comment requirements. The merchants’ second complaint against the NCUA made similar points about the NCUA rule with respect to the Federal Credit Union Act (FCUA) and called the NCUA rule “poorly reasoned” and “slapdash” (National Association of Convenience Stores v. Gould, No. 1:26-cv-03990; National Association of Convenience Stores v. Crews, No. 1:26-cv-03991 (D.D.C. Nov. 12, 2026)).

Background. IFPA bars covered entities from charging or receiving interchange fees on the tax or gratuity portion of an electronic payment transaction. It also contains a data-usage limitation restricting use of electronic payment transaction data except to facilitate or process the transaction or as required by law.

In Illinois Bankers Association v. Raoul, No. 1:24-cv-07307, a federal district court in Illinois had already granted the Illinois Bankers Association (IBA) and IBA co-plaintiffs partial permanent injunctive relief on reconsideration of a prior ruling in light of intervening OCC actions.

The OCC issued two interim final actions after it concluded the NBA preempted IFPA as applied to national banks and federal savings associations (OCC Bulletin 2026-17). OCC separately amended its regulations to clarify that national banks may charge non-interest fees, including interchange fees, regardless of whether those fees are set by the bank or a third party (OCC Bulletin 2026-18). The OCC said both actions were intended to prevent what it described as the imminent destabilizing effects of IFPA before its July 1, 2026, effective date (see Banking and Finance Law Daily, Apr. 27, 2026).

After the OCC interim actions, the U.S. Court of Appeals for the Seventh Circuit vacated the district court judgment and remanded. The OCC actions prompted multiple parties to file supplemental briefs, but the Seventh Circuit determined the district court should address the issues in the first instance (see Banking and Finance Law Daily, May 11, 2026).

On remand from the Seventh Circuit, the district court held Illinois may not enforce the IFPA’s interchange-fee limitation against national banks, banks chartered by states other than Illinois that are subject to Riegle-Neal, federal savings associations, or payment card networks. The district court’s initial February 2026 upholding IFPA (see Banking and Finance Law Daily, Feb. 11, 2026) on the IFPA data-usage limitation otherwise remained in effect (see Banking and Finance Law Daily, Jun. 2, 2026).

In September 2026, the district court extended its permanent injunction against IFPA to federal credit unions after concluding that a National Credit Union Administration (NCUA) interim final rule on federal credit unions’ fee authority changed the preemption analysis. The NCUA interim rule purports to determine that the FCUA protects federal credit unions’ ability to receive interchange fees established by payment card networks, even when those fees are set centrally and non-competitively by the networks rather than the by the financial institutions themselves. In granting the Illinois Bankers Association and co-plaintiffs’ motion for partial reconsideration, the court held that Illinois may not enforce the IFPA ban on charging or receiving interchange fees on the tax and tip portion of transactions against federal credit unions, national banks, banks chartered by states other than Illinois that are subject to Riegle-Neal, federal savings associations, or payment card networks (see Banking and Finance Law Daily, Sep. 23, 2026).

The merchants groups presently challenging the OCC and NCUA actions in twin complaints filed in the federal district court in Washington, D.C. include the National Retail Federation (NRF); National Association of Convenience Stores (NACS); the Retail Industry Leaders Association’s Retail Litigation Center (RLC); the National Restaurant Association’s Restaurant Law Center (NRA-RLC); FMI—the Food Industry Association (FMI); the National Grocers Association (NGA); the Illinois Retail Merchants Association (IRMA); the Illinois Fuel and Retail Association (IFRA); and the Illinois Restaurant Association (IRA).

OCC complaint. In the complaint against the OCC, the merchants say the OCC interim rule, titled National Bank Non-Interest Charges and Fees, 91 Fed. Reg. 22,989 (Apr. 29, 2026) (interim rule) “is based on a flawed legal interpretation of OCC powers, of national bank powers, and of preemption under the National Bank Act.” The merchants say IFPA applies only to swipe fees set by card networks, not banks, and that the OCC had targeted the card networks’ business, not the business of banking. Moreover, by issuing an “interim final” rule, OCC violated Administrative Procedure Act (APA) “notice and comment” requirements. The OCC complaint accuses the OCC of historically favoring financial interests by purporting to preempt state attempts to protect state constituents.

The complaint against the OCC states the following seven causes of action:

(1) and (2) violation of the APA insofar as NCUA interim rule was contrary to law and exceeded statutory authority (flawed interpretation of OCC powers and NBA preemption);

(3) and (4) violation of the APA insofar as the NCUA interim rule was arbitrary and capricious;

(5) and (6) violation of the APA insofar as the NCUA interim rule was procedurally invalid for lack of public notice and comment;

(7) violation of the APA insofar as the NCUA interim rule was procedurally invalid for lack of substantial evidence to support a finding of preemption;

The merchants asked the district court in Washington, D.C. for declaratory and injunctive relief and vacatur of the OCC interim rule and order, plus reasonable fees and costs.

NCUA complaint. The merchants’ complaint against the NCUA similarly faulted that agency for issuing its interim final rule, titled Preemption—Federal Credit Union Non-Interest Charges and Fees, 91 Fed. Reg. 34,725 (June 9, 2026) (interim rule), without APA notice and comment and in a way that was arbitrary and capricious. The merchants also claimed the interim rule exceeded NCUA authority under the Federal Credit Union Act because NCUA lacks authority to grant credit unions the power to charge unlimited interchange fees on merchants and does not work preemption over IFPA.

The complaint against the NCUA states the following four causes of action:

1. violation of the APA insofar as NCUA interim rule was contrary to law and exceeded statutory authority;

2. violation of the APA insofar as NCUA interim rule was arbitrary and capricious;

3. violation of the APA insofar as NCUA interim rule was procedurally invalid for lack of public notice and comment;

4. declaratory judgment that the NCUA revised regulation at 12 C.F.R. § 701.5, said not to cover IFPA, and its interim rule, did not preempt IFPA.

The merchants asked the district court in Washington, D.C. for declaratory and injunctive relief and vacatur of the NCUA interim rule, plus reasonable fees and costs.

NRF comment. As more fully quoted in the NRF press release, National Retail Federation Senior Vice President and General Counsel Marissa Bostick said the merchant groups’ two complaints are “about whether federal agencies can override state legislatures just to protect bank and credit union profits while small businesses and their customers pay the price.”

NACS comment. Also quoted in the NRF release, National Association of Convenience Stores General Counsel Doug Kantor said the two lawsuits show that the OCC and NCUA “ignored the law and didn’t have the authority to do what they did.” Kantor said the agencies’ “rushed” rewrites of federal regulations were “not legitimate.” He urged the courts to uphold IFPA and thus stop the credit card industry from extracting “huge fees” from consumers and small businesses.

NRA comment. Robin Repass, Executive Director of The National Restaurant Association’s Restaurant Law Center, said Illinois lawmakers had “intended to provide restaurant operators some relief by eliminating swipe fees on sales tax and tips, and a federal court upheld the law.” In her view, the OCC and NCUA did not follow proper procedure when they “deprived Illinois restaurant owners of the procedural right to protect their interests.”

RLC comment. Retail Litigation Center President Monica Welt noted that while families are “watching every dollar they spend, states should be able to protect merchants and consumers from an anticompetitive payment system and its inflated swipe fees.” She was critical that the banks and credit card companies are “padding their profits with unnecessary swipe fees that squeeze merchants and drive-up prices for consumers.” She said the OCC and NCUA “overstepped their authority and bypassed the normal processes” to block IFPA by “favoring banks, credit unions and credit card companies over the American consumer.”

FMI comment. FMI—the Food Industry Association CEO Lesley G. Sarasin similarly argued grocers should not be charged swipe fees on sales tax and tips because grocery shoppers are already watching every dollar, and every added cost matters. “Ending these fees helps ensure more of every dollar spent at the grocery store goes toward keeping prices for food and essential household needs as low as possible.”

NGA comment. National Grocers Association President and CEO Greg Ferrara noted the “razor-thin margins” of independent grocers and that “every dollar lost to excessive credit card swipe fees is a dollar that could otherwise go toward keeping groceries affordable, investing in employees and serving local communities.” He said the OCC and NCUA “sidestepped the law to protect bank and credit union profits,” whereas the merchants stood for upholding IFPA to stop “excessive swipe fees.”

IRMA comment. Illinois Retail Merchants Association President and CEO Rob Karr was critical that while the courts initially upheld IFPA, “banks, credit card companies and processors attempted an end run around legislators and the courts in an attempt to protect their ability to unilaterally impose fees on consumers and businesses.”

IFRA comment. Illinois Fuel and Retail Association CEO Nate Harris urged it is time to let IFPA do its work in preventing financial institutions from taking a cut of the sales tax on Illinois consumer card swipes. “Every month this law sits on hold, Illinois retailers and their customers pay more for nothing.”

IRA comment. Illinois Restaurant Association President and CEO Sam Toia noted that Illinois restaurants are “working on the thinnest of margins” and that the OCC and NCUA rules “took [IFPA] relief away from the small and independent restaurants that need it most.”

The cases are Nos. 1:26-cv-03990; 1:26-cv-03991.

Attorneys: Michael B. Schon (Lehotsky Cohn LLP) for National Assoc. of Convenience Stores.

Companies: National Assoc. of Convenience Stores

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