Editor's Note: This column was included in the April 30 Pulse enewsletter.The Office of the Comptroller of the Currency recently issued an interim final rule preempting the controversial Illinois interchange fee proposal. .The Illinois Interchange Fee Prohibition Act would ban banks and payment networks from charging or collecting interchange fees in the state on taxes and gratuity. Earlier this year, a district judge kept in place most of the law, only doing away with the part relating to data sharing. The American Bankers Association and other groups appealed the decision to the Chicago-based Seventh Circuit Court of Appeals. The Trump administration’s push to preempt the law is good for community banks but does not eliminate the law. The Illinois preemption only applies to national banks and federal savings associations, with state-chartered financial institutions still subject to the requirements. Merchant groups eager to benefit from the law could sue to prevent OCC preemption. Preemption does not take away uncertainty bankers face in Colorado and Delaware over similar proposed legislation. Earlier this year, a Delaware House committee advanced a bill disallowing collecting interchange fees for tips. In Colorado, a Senate committee advanced a bill to the full Senate — with exemptions for banks with less than $60 billion in assets — banning the collection of interchange fees for sales taxes. Advancement came after the chamber’s Democratic leadership switched out a party member on the committee who opposed the bill with the legislation’s main sponsor. While the Trump administration’s push against the Illinois interchange fee ban is welcome news for the industry, legal challenges and the possibility of other states enacting similar legislation leave bankers with doubt. That uncertainty will not change anytime soon.
