A coalition of merchant trade associations – including FMI – The Food Industry Association, the National Grocers Association, the National Association of Convenience Stores and the Illinois Retail Merchants Association – filed a pair of lawsuits challenging rules from the Office of the Comptroller of the Currency and the National Credit Union Administration that have blocked Illinois’ first-in-the-nation law banning credit and debit card swipe fees on sales tax and tips.
The suits, filed in U.S. District Court in Washington, D.C., argue the agencies exceeded their authority and violated the Administrative Procedure Act by issuing “interim final” rules without the customary notice-and-comment period, weeks before the Illinois law was to take effect. The merchant groups say nothing in the National Bank Act or the Federal Credit Union Act authorizes what the OCC suit calls “collusive and excessive fees on merchants that have no banking relationship with the financial institution charging those fees.”
Interchange fees set by card networks total nearly $200 billion a year nationwide, the suit said, and the Illinois law would save the state’s merchants and their customers more than $500 million per year. Fees on sales tax and tips are “particularly unfair,” the merchants argue, because those funds pass through to governments and employees rather than staying with the merchant.
How the Illinois law was stopped
Illinois passed the Interchange Fee Prohibition Act in 2024. In February, U.S. District Judge Virginia Kendall rejected banks’ arguments that the National Bank Act preempted the law, reasoning that swipe fees are set by card networks such as Visa and Mastercard, which are not banks. Banks appealed, and in April the OCC issued a rule asserting that the NBA preempts state laws from applying to nationally chartered banks; Kendall then ruled against the Illinois law in June, citing the rule. The NCUA followed with a similar rule covering federal credit unions, and in September Kendall expanded her injunction. Illinois Attorney General Kwame Raoul said last month he would appeal both rulings.
Banking groups have argued the Illinois law would create an unworkable patchwork of state payment rules and that federal law protects nationally chartered institutions’ card programs, positions the agencies’ rules adopted.
Grocery and convenience voices in the coalition
“After Illinois’ Interchange Fee Prohibition Act was initially upheld by the courts, 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,” said Illinois Retail Merchants Association President and CEO Rob Karr. “Today’s action highlights serious concerns about the action of federal regulators while reaffirming our commitment to pursue meaningful swipe fee relief for consumers, neighborhood retailers, restaurants and bars struggling with affordability.”
“Grocery shoppers are already watching every dollar at the checkout, and every added cost in the system matters,” said Leslie G. Sarasin, president and CEO of FMI. “Grocers should not be charged swipe fees on sales tax and tips, money they collect and pass through in full to governments and employees and do not keep as revenue. 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.”
“Independent grocers operate on razor-thin margins, and 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,” said Greg Ferrara, president and CEO of NGA. “The OCC and NCUA sidestepped the law to protect bank and credit union profits, and we’re asking the court to uphold Illinois’ law and protect the independent grocers and communities that bear the burden of excessive swipe fees.”
“These lawsuits show that the OCC and NCUA ignored the law and didn’t have the authority to do what they did,” said Doug Kantor, general counsel of NACS. “The OCC and NCUA’s rushed rewrites of federal regulations are not legitimate. The court should agree and help protect consumers and small businesses from the huge fees that the credit card industry is extracting from them every day.”
The plaintiff coalition also includes the National Retail Federation, the Retail Industry Leaders Association’s Retail Litigation Center, the National Restaurant Association’s Restaurant Law Center, the Illinois Retail Merchants Association, the Illinois Fuel and Retail Association and the Illinois Restaurant Association.
Related: FMI, Merchants Welcome Court Ruling Striking Down Debit Swipe Fee Cap