Banking and Finance Law Daily Wrap Up, STATE BANKING LAWS—Illinois AG urges Seventh Circuit to uphold interchange-fee limit, reverse injunction against data-use restriction, (Apr 7, 2026)

By Shashi Kant, BALLB, LLM

State’s combined brief argues IFPA does not significantly interfere with banking powers and says trade groups lacked standing to challenge data-usage provision.

Illinois Attorney General Kwame Raoul urged the Seventh Circuit to uphold the district court’s refusal to enjoin the Illinois Interchange Fee Prohibition Act’s interchange-fee limitation and to reverse the court’s permanent injunction against the statute’s data-usage restriction, arguing that the plaintiffs have overstated both the preemption issues and their alleged injury (Illinois Bankers Association v. Raoul, No. 26-1440 (7th Cir. Apr. 3, 2026)).

Background. In a combined principal and response brief, the State defended the district court’s February ruling that the IFPA’s interchange-fee limitation is not preempted as applied to national banks and federal savings associations because the provision does not significantly interfere with federally authorized banking powers. At the same time, in its cross-appeal, Illinois argued that the district court erred in enjoining the statute’s data-usage limitation because the trade-group plaintiffs lacked standing to bring a pre-enforcement challenge. The filing follows March briefs by the plaintiffs and the Office of the Comptroller of the Currency urging reversal of the district court’s refusal to enjoin the interchange-fee provision and affirmance of the ruling against the data-usage limitation (see Banking and Finance Law Daily, Mar. 17, 2026). The district court had earlier upheld the interchange-fee limitation while permanently enjoining the data-usage limitation as applied to national banks and certain other entities (see Banking and Finance Law Daily, Feb. 11, 2026).

State says interchange-fee provision does not significantly interfere with bank powers. Raoul’s brief argues that the district court correctly applied the Supreme Court’s recent Cantero decision and the Barnett Bank standard in concluding that the IFPA’s interchange-fee limitation does not significantly interfere with national bank powers. According to the State, the statute does not prohibit banks from issuing payment cards, receiving deposits, making loans, or processing card transactions. Instead, Illinois characterizes the law as an even-handed regulation of a particular fee practice affecting only the tax and gratuity portions of an electronic payment transaction.

The State argues that the fees targeted by the statute are default interchange fees set and calculated by payment card networks, not fees independently fixed by banks themselves. Because issuers and acquirers remain free, in Illinois’s view, to negotiate other arrangements, the brief maintains that the statute does not ban or effectively prevent banks from exercising any federally authorized business power. The State relies on the distinction between state laws that actually or effectively prohibit a banking power and ordinary state regulation that may impose costs or alter pricing incentives without amounting to significant interference.

Illinois also disputes the plaintiffs’ broader preemption theories under the Home Owners’ Loan Act and the Federal Credit Union Act. As to federal savings associations, the State contends that the same significant-interference analysis defeats preemption. As to federal credit unions, Illinois argues both that Barnett Bank should not control and that, even if it did, the interchange-fee limitation still would not materially intrude on credit-union powers.

State resists broader relief for out-of-state banks and networks. Raoul’s brief also opposes the plaintiffs’ claims on behalf of out-of-state state-chartered banks and payment card networks. The State argues that the dormant Commerce Clause theory is barred by the Eleventh Amendment because it depends on a declaration about how Illinois parity statutes operate against state officials. On the merits, Illinois contends that neither the parity statutes nor the IFPA facially discriminates against interstate commerce. The brief further argues that Section 1831a(j)(1) does not entitle out-of-state state banks to broad relief because that provision applies only to activities conducted through Illinois branches of out-of-state state banks. And even if banks were entitled to preemption-based relief, Illinois says the injunction should not be expanded to payment card networks on equitable grounds. According to the State, any such extension would exceed what is necessary to protect federally regulated banks and would conflict with the text of the National Bank Act.

Cross-appeal targets standing for data-usage challenge. On cross-appeal, Illinois argues that the district court should have dismissed the challenge to the IFPA’s data-usage limitation for lack of standing. According to the State, the plaintiffs failed at summary judgment to show that the conduct they wish to engage in, particularly certain fraud-prevention and rewards-related uses of transaction data, is actually prohibited by a reasonable reading of the statute. The State contends that the data-usage limitation allows use of transaction data to “facilitate or process” an electronic payment transaction, and that the word “facilitate” must be given independent meaning under Illinois rules of statutory interpretation. On that reading, Illinois argues, fraud-detection tools and rewards programs may fall within the statutory exception because they make payment transactions easier or more workable. The State therefore says the plaintiffs cannot show a credible threat of enforcement and lack standing to seek pre-enforcement relief. Illinois also challenges the district court’s merits analysis of the data-usage provision, arguing that the court adopted an unduly narrow reading of the statute and moved too quickly from a disputed interpretation question to a permanent injunction. In the State’s view, the proper course was dismissal for lack of jurisdiction, not entry of broad prospective relief against enforcement.

Attorneys: Boris Bershteyn (Skadden, Arps, Slate, Meagher & Flom LLP) for Illinois Bankers Association, American Bankers Association, America's Credit Unions and Illinois Credit Union League. Carson Griffis, Office of the Attorney General, for Kwame Raoul.

Companies: Illinois Bankers Association; American Bankers Association; America's Credit Unions; Illinois Credit Union League

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