Nine merchant trade associations sued the federal government’s two big bank and credit-union regulators in Washington on Thursday, November 12, opening a new legal front in the fight over Illinois’ first-in-the-nation law banning credit and debit card swipe fees on the sales-tax and tip portions of a purchase.
Source: Payments Dive
The twin lawsuits, filed in the US District Court for the District of Columbia, target the Office of the Comptroller of the Currency (OCC) and the National Credit Union Administration (NCUA). Earlier this year both agencies issued rules declaring that federal banking law preempts — overrides — the Illinois Interchange Fee Prohibition Act for the banks and credit unions they regulate. The merchants argue the OCC “skipped over the notice-and-comment procedures required by the Administrative Procedure Act and the National Bank Act” when it acted.
Source: National Retail Federation
“Nothing in the National Bank Act — or in the OCC’s poorly reasoned, slapdash rule — authorizes such collusive and excessive fees on merchants that are not being provided banking services in exchange for those fees,” the lawsuit against the OCC says. The plaintiffs include the National Retail Federation, the National Association of Convenience Stores, the National Grocers Association, the restaurant and retail litigation centers, and three Illinois groups: the Illinois Retail Merchants Association, the Illinois Fuel and Retail Association and the Illinois Restaurant Association.
The Illinois law at the centre of the fight
Governor JB Pritzker signed the Interchange Fee Prohibition Act in June 2024, making Illinois the first state to bar interchange fees — the percentage merchants pay on every card transaction, which flows to the bank that issued the customer’s card — on the tax and gratuity parts of a bill. The law does not touch the fee on the price of the goods themselves. Lawmakers have since delayed its start date; it is now set to take effect on July 1, 2027.
The sums are not small. According to the merchants’ lawsuit, citing data from the Illinois Fuel & Retail Association, Illinois merchants pay at least $242 million a year in interchange fees on taxes and tips alone, and merchant groups estimate the law would save Illinois businesses and their customers about $500 million annually. The law covers transactions on the Visa and Mastercard networks, which the lawsuits say handle over 80 per cent of all card transactions.
Two courtrooms, opposite directions
Thursday’s filings are the second courtroom battle over the same law. Banks and credit unions sued in Chicago in August 2024. In February 2026, US District Judge Virginia Kendall initially rejected the banks’ preemption argument, reasoning that swipe fees are set by card networks such as Visa and Mastercard, not by banks. The OCC then moved to preempt the law in April 2026, and the NCUA followed with its own rule on June 30. Citing the OCC rule, Judge Kendall ruled against the Illinois law in June, and in September she expanded her injunction to cover federal credit unions. Illinois Attorney General Kwame Raoul announced last month that the state will appeal, and Illinois and the bank associations are both appealing parts of Kendall’s rulings, with arguments in that case scheduled for late January.
The regulators are not commenting on the new challenge: an OCC spokesperson declined to comment on Thursday, and the NCUA did not immediately respond to a request for comment, Payments Dive reported. The payments industry, for its part, expects the preemption to survive. “We are confident the OCC’s actions will pass muster,” Scott Talbott, an executive vice president of the Electronic Transactions Association — which represents banks, card networks and processors including Visa and PayPal — said in an email on Thursday. These are the parties’ positions, stated as claims in an active court fight, not court findings.
The merchants warn in their filing that the OCC’s move “will chill other States” from copying Illinois. They have a point about the stakes: 32 interchange-related bills were introduced this year in 20 states, Washington, DC and Puerto Rico. If the Washington court upholds the preemption, those efforts are likely dead; if it strikes the rules down, Illinois’ model becomes the national template.
For the small businesses that dominate Illinois retail — the gas stations, convenience stores, liquor stores and family restaurants of Chicago and its suburbs, many of them immigrant-owned, including by Punjabi families — the fees at issue are a daily cost taken off every card sale before the till is counted, charged even on the tax the store merely collects for the state and the tip it passes to staff. That is the practical ground on which two federal lawsuits, one state appeal and a July 2027 deadline will now be fought.
What happens next: the OCC and NCUA must respond to the new lawsuits in federal court in Washington, while the Chicago case moves toward its late-January appellate arguments. No court date for the new filings had been announced as of Thursday.