On June 30, 2026, the Office of the Comptroller of the Currency issued a preemption determination that stopped Illinois’ Interchange Fee Prohibition Act from ever touching a single transaction processed by a nationally chartered bank. The state law was set to take effect the very next day, July 1. That one-day gap between the federal ruling and the state deadline effectively gutted the IFPA before it could deliver the relief it promised to servers, bartenders, and merchants across the state.
The IFPA was designed to prohibit banks and card networks from collecting interchange fees, commonly called swipe fees, on the tax and gratuity portions of electronic payments. According to Federal Reserve data, credit card interchange fees average roughly 2% to 2.5% of a transaction, though rates vary by card type and merchant category and can run higher. On a $130 restaurant bill that includes $10 in sales tax and a $20 tip, the swipe fee on that $30 alone could cost the merchant somewhere around $0.60 to $0.75, depending on the rate. Scale that across thousands of daily card transactions at restaurants, salons, and retail shops statewide, and the cost to workers and small businesses adds up quickly. The statute also created civil penalties and refund mechanisms, giving merchants a legal path to reclaim improperly charged fees.
What the OCC determination actually does
The OCC’s order stated that national banks and federal savings associations “are neither subject to nor required to comply with the IFPA.” Because the largest card-issuing institutions in the country operate under federal charters, the practical reach of the Illinois law shrank dramatically the moment the determination was published.
For a typical restaurant or retail shop that processes most of its card volume through major brands backed by nationally chartered banks, the core of its payment traffic is now insulated from the state rule. The agency justified its decision by arguing that the IFPA would create what it called an unworkable and destabilizing standard for national banks and payment card systems. The determination invokes longstanding federal authority over national bank powers and the need for uniform rules across nationwide payment networks. In the OCC’s framing, allowing one state to carve out pieces of the interchange base threatened to fragment pricing structures and compliance systems across the country.
The result is a sharp mismatch between the statute on Illinois’ books and what most card issuers will actually do. On paper, the IFPA still prohibits charging interchange on taxes and gratuities. In practice, the federal determination tells the biggest players in the card ecosystem to carry on as if the law does not exist.
How the timeline collapsed
Illinois lawmakers had already delayed the law once. Public Act 104-0004 amended the IFPA’s effective date so that Article 150, the section containing the interchange fee ban, would not kick in until July 1, 2026. Readers can verify the specific provision by reviewing the linked text of the public act, which details the amended effective date for Article 150. That delay gave the banking industry and federal regulators months of additional runway to prepare a response.
The OCC used nearly all of it. By issuing its preemption determination on June 30, one day before the compliance deadline, the agency left no window for the state law to operate against federally chartered banks. The federal action arrived just late enough to avoid months of overlapping enforcement and potential emergency injunctions, but just early enough to block Illinois regulators from testing the statute on day one.
Merchants that had spent months updating point-of-sale systems and training staff learned that the most consequential piece of the law had been neutralized before it ever took effect. The compressed timeline also limited public debate. With the key federal decision arriving at the last possible moment, there was no period in which consumers or workers could see the law in action, measure its impact on receipts or paychecks, and weigh in on whether the trade-offs were worth it.
Where this leaves Illinois merchants and workers
The OCC determination covers national banks and federal savings associations, but the IFPA’s text applies more broadly to any entity that charges or receives interchange fees on electronic payment transactions. State-chartered banks, credit unions regulated at the state level, and payment processors without federal charters sit in a legal gray zone. For those institutions, the federal determination does not provide explicit shelter. Yet the economics of competing against exempt national banks may push them to follow prevailing industry practice anyway, effectively extending the preemption’s reach beyond its legal boundaries.
Illinois is not the only state that has tried to rein in interchange fees. Connecticut passed SB 1177 in 2025, its own interchange fee legislation, and several other states have introduced similar bills. The OCC’s preemption of the Illinois law could serve as a template for blocking those efforts as well, raising the stakes well beyond a single state’s borders. The Merchants Payments Coalition, a trade group representing retailers and restaurants, has long argued that interchange fees are set without meaningful competition and ultimately passed on to consumers through higher prices.
As of late June 2026, neither Visa nor Mastercard, the two networks that set most interchange rate schedules, had issued a public statement on the OCC determination. A review of both companies’ newsrooms and SEC filings through the end of June 2026 turned up no press releases, investor disclosures, or official commentary addressing the preemption. Their silence is notable because interchange rates are not set by individual banks but by the card networks themselves. Even if the IFPA had taken full effect, enforcement would have required untangling the relationship between network-set rates and bank-collected fees, a complexity the OCC’s determination sidesteps entirely.
Similarly, a search of the Illinois Attorney General’s official website, press releases, and public filings through late June 2026 found no response to the preemption from the AG’s office or from state legislators who sponsored the IFPA. That silence leaves open basic questions: Will Illinois attempt to enforce the IFPA against non-federally-chartered institutions? Will state regulators issue guidance clarifying which entities remain covered? Or will the law sit on the books as a largely symbolic measure?
Why the absence of a legal challenge matters
So far, no lawsuit challenging the OCC’s preemption authority has been filed. Illinois could argue in federal court that the agency overstepped, seeking a ruling that restores some or all of the law’s reach. Another option would be a narrower enforcement action against a state-regulated institution, forcing judges to decide how far the federal determination really extends. Neither path has been confirmed, and the longer the silence lasts, the more entrenched the status quo becomes.
There is also the question of whether Congress could weigh in. The Credit Card Competition Act, reintroduced in recent sessions by Senators Dick Durbin and Roger Marshall, would require large card-issuing banks to offer merchants a choice of at least two unaffiliated networks for processing transactions, a move supporters say would drive interchange rates down through competition. That bill has stalled repeatedly, but the OCC’s preemption of a state-level fix could renew pressure on federal lawmakers to act.
What servers and merchants are still paying after the preemption
No official OCC or Illinois data quantifying how much consumers would have saved, or how much revenue banks would have lost, has been published alongside these actions. Without court filings or enforcement actions on record, the practical scope of the state law after the federal determination is genuinely uncertain. For now, servers and bartenders across Illinois will keep seeing interchange skimmed off the tips customers leave on cards. Merchants will keep paying swipe fees on the taxes they collect for the state. And a law that was supposed to change all of that sits on the books, technically alive but functionally blocked, waiting for someone to decide whether it is worth fighting for.
Warren Cohen is a finance writer based in Phoenix, Arizona, covering personal finance topics including credit, banking, and beginner investing. He earned his degree in business administration from Arizona State University and began his career working in consumer finance, where he gained direct experience with lending and credit systems. He now writes for personal finance websites and fintech platforms, focusing on clear, practical content that helps readers make informed financial decisions.
