Illinois merchants were one day away from paying less every time a customer swiped a credit card. Then a federal regulator killed the discount before it started.
On June 30, 2026, the Office of the Comptroller of the Currency published an interim bulletin declaring that national banks and federal savings associations do not have to comply with the Illinois Interchange Fee Prohibition Act. The IFPA, codified as 815 ILCS 151/150-1 et seq., was set to take effect July 1. It would have barred covered entities from charging interchange fees on the tax and tip portions of electronic payment transactions and capped the assessable transaction amount to the base price of goods or services. The law also restricted how transaction data could be shared between parties in the payment chain.
Interchange fees, commonly called swipe fees, typically run between 1.5% and 3.5% of each credit card transaction, according to the Federal Reserve’s 2023 Payments Study (published in June 2024). On a $50 restaurant tab, that means the restaurant might hand over $0.75 to $1.75 before accounting for any other processing costs. Across the entire U.S. economy, those fees add up fast: the same Federal Reserve study reported that credit card interchange and network fees totaled roughly $160 billion in 2022.
The OCC paired its bulletin with a separate interim final rule on non-interest charges and fees. In an accompanying news release, the agency described both actions as necessary to prevent “imminent disruption” to bank operations and to preserve uniform national standards for institutions that process millions of card transactions daily across state lines.
Why the OCC says it has the authority
Federal preemption of state banking laws is not new, but the speed of this intervention is notable. The National Bank Act has long been read to give federally chartered banks broad powers to set the terms of their products, including the fees they charge. The Supreme Court reinforced that principle in Barnett Bank of Marion County v. Nelson (1996), holding that federal law preempts state statutes that “significantly interfere” with a national bank’s exercise of its powers.
The OCC’s position is that setting interchange fees falls squarely within those powers and that Illinois cannot unilaterally restrict them. It is worth noting, however, that the Dodd-Frank Act’s Section 1044, enacted in 2010, tightened the standard for preemption. Under Dodd-Frank, the OCC must determine on a “case-by-case basis” that a state law “prevents or significantly interferes” with a national bank’s powers. Whether the agency’s blanket bulletin satisfies that standard is a question legal scholars and courts may revisit.
The agency chose an interim final rule rather than the standard notice-and-comment rulemaking process. Interim final rules can take effect immediately but typically include a post-publication comment period, meaning the OCC may still receive and respond to public feedback. Even so, the procedural shortcut is likely to draw scrutiny. Critics may argue the agency did not adequately justify bypassing a longer deliberation on a question with significant economic consequences for small businesses across the state.
What this means for merchants and cardholders
For Illinois retailers who had been counting on lower processing costs starting in July, the relief is off the table, at least for now. Interchange fees will continue under the same structures that card networks like Visa and Mastercard, along with issuing banks, have maintained for years. Merchants will keep paying the same rates to their payment processors, and those costs will continue to be baked into the prices consumers see on shelves and menus.
Neither Visa nor Mastercard has publicly commented on the Illinois IFPA or the OCC’s preemption action, though both networks have historically opposed state-level interchange regulation. The Electronic Payments Coalition, a trade group representing card networks and major banks, has consistently argued that interchange fees fund fraud prevention, rewards programs, and payment infrastructure, and that government-imposed caps would reduce those benefits for consumers.
The National Retail Federation, which has long advocated for interchange reform, has called swipe fees the largest operating cost for many retailers after labor. For a small business running on thin margins, the difference between a 1.5% and a 3.5% processing fee on every card transaction can determine whether a month ends in the black or the red.
Cardholders themselves will not notice any change at checkout. Cards issued by national banks will work exactly as they did before, with the same rewards, the same terms, and the same behind-the-scenes fee flow. The OCC’s action preserves the status quo, which is precisely the point.
The gaps that still need answers
The OCC has not published any projections on the economic impact of its preemption order. There are no agency figures showing how much interchange revenue Illinois merchants stood to save under the IFPA, or how much national banks stood to lose. Both industry groups and consumer advocates are working from their own models, and those models tend to diverge sharply depending on who built them.
Legal durability is another open question. Illinois officials or merchant associations could challenge the preemption in federal court, arguing that the IFPA addresses consumer protection and commercial fairness rather than core banking powers. The outcome would likely hinge on how broadly courts read the National Bank Act’s preemption clause, whether the Dodd-Frank case-by-case standard was properly applied, and whether the OCC’s procedural choices survive judicial review.
Then there is the question of who the OCC does not regulate. State-chartered banks and credit unions fall outside the agency’s jurisdiction. Unless a different federal regulator or a court intervenes, the IFPA could still apply to those institutions, creating a two-tier system in Illinois where some card issuers are bound by state limits on interchange charges while their nationally chartered competitors are exempt. Because the vast majority of credit card transaction volume in the United States flows through nationally chartered banks and their affiliated networks, the share of Illinois transactions actually subject to the IFPA’s caps under a two-tier arrangement could be relatively small. For merchants, that patchwork would still complicate processing cost management and could require different routing strategies depending on which bank issued a customer’s card.
Why other states are paying close attention
Illinois was widely seen as a test case. Lawmakers in several other states had been tracking the IFPA’s progress as a potential model for their own interchange legislation. The OCC’s aggressive preemption sends a clear signal: the agency is willing to act fast and use its full authority to shield national banks from state-level fee controls.
That does not necessarily close the door on state action. Some legislatures may pursue narrower measures targeting entities the OCC cannot protect, such as state-chartered banks or non-bank payment processors. Others may wait to see whether Illinois mounts a legal challenge and how courts rule before committing resources to similar bills.
At the federal level, the Credit Card Competition Act, sponsored by Senators Dick Durbin and Roger Marshall, remains the most prominent congressional effort to address interchange costs directly. The bill would require large card-issuing banks to offer merchants a choice of at least two processing networks, one of which cannot be Visa or Mastercard. It was introduced in the 117th Congress (2022) and reintroduced in the 118th Congress (2023). As of mid-2026, the bill has not advanced to a floor vote in either chamber.
Where the swipe-fee fight moves next
If the Illinois preemption holds and no federal competition bill advances, the current fee structure will remain largely intact. For the merchants absorbing those costs and the consumers who ultimately pay for them through higher prices, the fight over swipe fees is far from settled. It has just moved from Springfield to Washington, and possibly to federal court.
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.
