FOR IMMEDIATE RELEASE
Contact: J. Craig Shearman
(202) 257-3678 craig@shearmancommunications.com
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WASHINGTON, Sept. 23, 2026 — The Merchants Payments Coalition today expressed strong disapproval of a federal court decision shielding federal credit unions from an Illinois law protecting its people from credit card swipe fees on sales tax and tips.
U.S. District Judge Virginia Kendall on Tuesday expanded an injunction she issued in June, siding with the National Credit Union Administration’s claim that federal credit unions are exempt from the ban, a move that could protect cartel behavior by the credit card industry that inflates swipe fees paid by American consumers.
“Congress and the courts have repeatedly rebuked the Office of the Comptroller of the Currency for overreaching to protect Wall Street banks from common-sense regulations, and now the NCUA is trying to do the same,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “The NCUA has clearly exceeded its authority, and we expect the court will be overruled in an appeal or subsequent case. States can and should protect their local businesses and consumers from abusive, unfair practices by credit unions and banks.”
In February, Kendall rejected arguments that federal law preempted the Illinois restriction on interchange fees, reasoning in part that the fees are centrally established by third-party card networks rather than individual financial institutions. Her June injunction, issued after the OCC intervened with its own preemption rule, protected national banks, certain out-of-state banks, federal savings associations and payment card networks — but expressly did not extend that protection to federal credit unions.
NCUA changed the equation days later. Its June 9 interim final rule declared that the agency could expand the law in new, untested ways and that even in the face of anticompetitive activity by the credit card industry, it had exclusive authority over federal credit unions’ non-interest charges and fees, including interchange fees. The rule took effect on June 30.
MPC and other groups challenged that action in comments filed with NCUA, arguing that the agency stretched the Federal Credit Union Act beyond what Congress authorized, adopted an excessively broad theory of federal preemption, and acted on an inaccurate understanding of how modern card transactions work. MPC also objected to the agency putting the rule into effect before its public comment period had concluded.
“The underlying problem hasn’t disappeared simply because NCUA issued a rule saying otherwise,” Kantor said. “Visa and Mastercard still set these fees. They are not federal credit unions, and Congress did not give NCUA authority to insulate card networks from state laws simply because a credit union happens to issue the card. Those questions deserve review on their merits.”
MPC has also rejected claims that excluding sales tax and tips from swipe fees is technologically unworkable. The coalition says payment networks already transmit information identifying those portions of transactions, and that arguments tying those fees to fraud protection overlook the substantial fraud costs borne by merchants themselves.
The Illinois Interchange Fee Prohibition Act would prohibit credit and debit card interchange fees from being charged on the tax and gratuity portions of purchases. Its implementation has been delayed until July 1, 2027. MPC estimates the law would save Illinois businesses and their customers more than $500 million annually.
Tuesday’s ruling could put the dispute back before the 7th U.S. Circuit Court of Appeals, which previously returned the case to Kendall after the OCC intervened. The credit union industry has said it expects further appellate litigation.
About MPC
The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants. Follow MPC on Twitter, Facebook or LinkedIn for the latest on swipe fees.