[Federal Register Volume 91, Number 82 (Wednesday, April 29, 2026)]
[Notices]
[Pages 23150-23158]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-08341]
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DEPARTMENT OF THE TREASURY
Office of the Comptroller of the Currency
[Docket ID OCC-2026-0431]
RIN 1557-ZA10
Order Preempting the Illinois Interchange Fee Prohibition Act
AGENCY: Office of the Comptroller of the Currency (OCC), Treasury.
ACTION: Interim final order; request for comments.
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SUMMARY: The OCC is issuing an interim final order concluding that
Federal law preempts the Illinois Interchange Fee Prohibition Act,
which purports to prohibit national banks and Federal savings
associations from charging or receiving interchange fees on the tax and
gratuity portions of payment card transactions; and restrict the use of
payment card transaction data. The OCC invites public comments on this
interim final order.
DATES: The interim final order is effective June 30, 2026. Comments on
the interim final order must be received on or before May 29, 2026.
ADDRESSES: Commenters are encouraged to submit comments through the
Federal eRulemaking Portal. Please use the title ``Order Preempting the
Illinois Interchange Fee Prohibition Act'' to facilitate the
organization and distribution of the comments. You may submit comments
by any of the following methods:
Federal eRulemaking Portal--Regulations.gov:
Go to https://regulations.gov/. Enter Docket ID ``OCC-2026-0431''
in the Search Box and click ``Search.'' Public comments can be
submitted via the ``Comment'' box below the displayed document
information or by clicking on the document title and then clicking the
``Comment'' box on the top-left side of the screen. For help with
submitting effective comments, please click on ``Commenter's
Checklist.'' For assistance with the Regulations.gov site, please call
1-866-498-2945 (toll free) Monday-Friday, 9 a.m.-5 p.m. ET, or email
[email protected].
Mail: Chief Counsel's Office, Attention: Comment
Processing, Office of the Comptroller of the Currency, 400 7th Street
SW, Suite 3E-218, Washington, DC 20219.
Hand Delivery/Courier: 400 7th Street SW, Suite 3E-218,
Washington, DC 20219.
Instructions: You must include ``OCC'' as the agency name and
Docket ID ``OCC-2026-0431'' in your comment. In general, the OCC will
enter all comments received into the docket and publish the comments on
the Regulations.gov website without change, including any business or
personal information provided such as name and address information,
email addresses, or phone numbers. Comments received, including
attachments and other supporting materials, are part of the public
record and subject to public disclosure. Do not include any information
in your comment or supporting materials that you consider confidential
or inappropriate for public disclosure.
You may review comments and other related materials that pertain to
this action by the following method:
Viewing Comments Electronically--Regulations.gov:
Go to https://regulations.gov/. Enter Docket ID ``OCC-2026-0431''
in the Search Box and click ``Search.'' Click on the ``Dockets'' tab
and then the document's title. After clicking the document's title,
click the ``Browse All Comments'' tab. Comments can be viewed and
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right side of the screen or the ``Refine Results'' options on the left
side of the screen checking the ``Supporting & Related Material''
checkbox. For assistance with the Regulations.gov site, please call 1-
866-498-2945 (toll free) Monday-Friday, 9
[[Page 23151]]
a.m.-5 p.m. ET, or email [email protected].
The docket may be viewed after the close of the comment period in
the same manner as during the comment period.
FOR FURTHER INFORMATION CONTACT: Karen McSweeney, Special Counsel,
Priscilla Benner, Counsel, and Elizabeth Small, Counsel, Chief
Counsel's Office, 202-649-5490; Office of the Comptroller of the
Currency, 400 7th Street SW, Washington, DC 20219. If you are deaf,
hard of hearing or have a speech disability, please dial 7-1-1 to
access telecommunications relay services.
SUPPLEMENTARY INFORMATION:
I. Introduction
A. Background
Credit and debit cards (payment cards) are vital and deeply rooted
components of the modern American and global economy. They are among
the most universally accepted and common payment methods, routinely
used by millions of customers to pay merchants for products and
services worldwide.\1\
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\1\ OCC, Comptroller's Handbook, ``Credit Card Lending,'' 1
(2021) (``Credit Card Lending Handbook''). See also Berhan Bayeh et
al., Federal Reserve 2025 Findings from the Diary of Consumer
Payment Choice at 5 (finding that, in 2024, credit and debit cards
were used for approximately 65 percent of consumer payments).
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National banks and Federal savings associations serve essential
roles within card networks, which are a crucial means of exercising
their statutory deposit-taking and lending powers. They contract with
card networks (e.g., Visa and Mastercard) and others to facilitate
payment card transactions. As the issuers of credit and debit cards,
they provide payment cards to customers, assess cardholder risk, and
offer services including fraud detection and prevention, dispute
resolution, and rewards programs. As acquirers, they contract with
merchants who accept payment cards and connect these merchants to the
card network so that transactions are seamlessly processed and settled.
As compensation, national banks and Federal savings associations
are paid fees for their payment card services. These fees, which
include interchange fees,\2\ compensate these institutions for the
costs of their participation, incentivize their provision of services
and continued participation in the network, and enable enhancements,
such as fraud detection and prevention, rewards programs, and
technology upgrades.
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\2\ An ``interchange fee'' is generally the fee paid to an
issuer bank as part of a payment card transaction.
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Interchange fees have often been the focus of lawmakers. In 2010,
as part of the Dodd-Frank Wall Street Reform and Consumer Protection
Act (Dodd-Frank), Congress limited certain debit card interchange fees
in a provision generally known as ``the Durbin Amendment.'' \3\ In
2024, in an effort to balance the State's budget,\4\ the Illinois
legislature enacted the Interchange Fee Prohibition Act (IFPA), which
becomes effective on July 1, 2026.\5\ The IFPA (1) prohibits charging
or receiving interchange fees on the tax and gratuity portions of
payment card transactions; and separately (2) restricts the use of
payment card transaction data.
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\3\ Public Law 111-203, 124 Stat. 1376, Title X, Sec. 1075,
codified at 15 U.S.C. 1693o-2.
\4\ See American Banker, Why Illinois' Budget Bill has Bankers
Sounding the Alarm (June 10, 2024), available at https://www.americanbanker.com/news/why-illinois-budget-bill-has-bankers-sounding-the-alarm; Bloomberg Law, Illinois Credit Card Swipe Fee
Law Sparks Legal Fight with Banks (Aug. 8, 2024), available at
https://news.bloomberglaw.com/banking-law/illinois-credit-card-swipe-fee-law-sparks-legal-fight-with-banks.
\5\ 815 Ill. Comp. Stat. 151/10-1 et seq.
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The IFPA may have a destabilizing effect on the nation's payment
card systems. At a minimum, the systems' participants, including
national banks and Federal savings associations, may have to spend
``staggering'' sums to comply with this single State's law.\6\ Card
network participants may have to significantly alter their operations,
which could include national banks or Federal savings associations
declining payment card transactions subject to the IFPA. Some have
stated that compliance with the IFPA could lead to ``potentially
business-ending consequences'' for some participants.\7\
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\6\ Ill. Bankers Ass'n v. Raoul,--F. Supp. 3d--, 2026 WL 371196,
at *13 (N.D. Ill. Feb. 10, 2026).
\7\ Id. at *6.
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As applied to national banks and Federal savings associations, the
IFPA also runs afoul of the Supremacy Clause of the U.S. Constitution
and is preempted.\8\ Although the OCC believes that this conclusion is
clear under relevant Supreme Court precedent, the IFPA has been the
subject of litigation since shortly after its enactment, which has led
to substantial uncertainty for national banks and Federal savings
associations.\9\ As such, the OCC is issuing this interim final order
concluding that the IFPA is preempted by (1) the National Bank Act with
respect to national banks; and (2) the Home Owners' Loan Act of 1933
(HOLA) respect to Federal savings associations.\10\ This order will
provide urgently needed clarity to help ensure national banks' and
Federal savings associations' continued safe, sound, reliable,
efficient, and effective participation in the payment card system.\11\
Given the importance of this issue, the OCC also invites public comment
on all aspects of this order and intends to issue a final order as soon
as possible after the close of the comment period and after sufficient
time to consider and address comments. The agency notes that nothing in
this order would change the applicability of any other federal laws
that do or may in the future apply to national banks or Federal savings
associations regarding payment cards or otherwise.
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\8\ U.S. Const. art. VI, cl. 2.
\9\ See, e.g., Ill. Bankers Ass'n, 2026 WL 371196.
\10\ The analysis in this interim final order focuses on
national bank powers and preemption of the IFPA by the National Bank
Act. However, the HOLA and its implementing regulations provide
Federal savings associations with comparable powers. See 12 U.S.C.
1464; 12 CFR 145.17, 155.200. The HOLA also applies ``the laws and
legal standards applicable to national banks'' in determining
whether Federal law preempts State regulation of Federal savings
associations. 12 U.S.C. 1465(a). As such, this interim final order
applies equally to Federal savings associations and preemption by
the HOLA.
\11\ Congress and courts have long recognized the OCC's
authority to provide clarity on preemption. See 5 U.S.C. 554(e)
(authorizing agencies to issue declaratory orders ``to terminate a
controversy or remove uncertainty''); see also 12 U.S.C. 25b
(expressly granting the OCC authority to issue preemption
determinations on State consumer financial laws by regulation or
order); 12 U.S.C. 43 (recognizing the OCC's authority to issue
interpretive rules or opinion letters on preemption); Aguayo v. U.S.
Bank, 653 F.3d 912, 919 (9th Cir. 2011) (concluding that the OCC's
``regulatory authority, which carries the same weight as federal
statutes, includes interpretation of state law preemption under the
NBA''); Wells Fargo Bank N.A. v. Boutris, 419 F.3d 949, 962 (9th
Cir. 2005) (``once the OCC's authority to allow the creation of and
to regulate operating subsidiaries as it has done is established,
its authority to displace contrary state regulation where the Bank
Act itself preempts contrary state regulation of national banks
follows''); Wachovia Bank, N.A. v. Burke, 414 F.3d 305, 314 (2d Cir.
2005) (``Federal courts have recognized that the OCC may issue
regulations with preemptive effect.'').
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B. Summary of the IFPA
Interchange Fee Prohibition. The first operative provision of the
IFPA prohibits card issuer banks, card networks, acquirer banks, and
other participants from receiving or charging a merchant an interchange
fee on the tax or gratuity amount of a payment card transaction.\12\
This prohibition applies if the merchant informs the acquirer bank of
the tax or gratuity amount as part of the authorization or settlement
of the
[[Page 23152]]
transaction.\13\ Alternatively, the merchant has 180 days to transmit
the relevant documentation (e.g., paper receipts) to the acquirer bank,
after which the issuer bank has 30 days to credit the merchant for any
interchange fee charged on the tax or gratuity amount.\14\ Violations
of the interchange fee prohibition carry a civil penalty of $1,000 per
transaction.\15\
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\12\ 815 Ill. Comp. Stat. 151/150-10(a). The IFPA defines an
interchange fee as ``a fee established, charged, or received by a
payment card network for the purpose of compensating the issuer for
its involvement in an electronic payment transaction.'' Id. at 151/
150-5.
\13\ Id. at 151/150-10(a).
\14\ Id. at 151/150-10(b).
\15\ Id. at 151/150-15(a).
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Data Use Limitation. The second operative provision of the IFPA
provides that no ``entity, other than the merchant, involved in
facilitating or processing'' a payment card transaction may
``distribute, exchange, transfer, disseminate, or use'' transaction
data except to facilitate or process the transaction or as otherwise
required by law.\16\ Violations of the data use limitation are
violations of the Illinois Consumer Fraud and Deceptive Business
Practices Act.\17\
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\16\ Id. at 151/150-15(b).
\17\ Id.
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II. Preemption Analysis
A. Preemption Standard
The Supremacy Clause of the U.S. Constitution provides that Federal
law is ``the supreme Law of the Land'' and contrary State law is
preempted.\18\ In applying this principle, the Supreme Court has
identified several ways in which Federal law may preempt State law,
including when there is a conflict between State and Federal law.\19\
In Barnett Bank, the Supreme Court clarified the standard for conflict
preemption in the national banking context, holding that State law is
preempted when it ``prevent[s] or significantly interfere[s]'' with a
national bank's exercise of its Federal powers.\20\ The Barnett Bank
Court also stated that Federal grants of authority in the national
banking context are ``not normally limited by, but rather ordinarily
pre-empt[ ], contrary state law.'' \21\
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\18\ Supra note 8 (``This Constitution, and the Laws of the
United States which shall be made in Pursuance thereof; and all
Treaties made, or which shall be made, under the Authority of the
United States, shall be the supreme Law of the Land; and the Judges
in every State shall be bound thereby, any Thing in the Constitution
or Laws of any State to the Contrary notwithstanding.'').
\19\ Barnett Bank of Marion Cnty., N.A. v. Nelson, 517 U.S. 25
(1996).
\20\ Id. at 33.
\21\ Id. at 32. As this language in Barnett Bank reflects, there
is no presumption against preemption in the context of National Bank
Act preemption. See, e.g., Bank of Am. v. City & Cnty. of S.F., 309
F.3d 551, 558 (9th Cir. 2002).
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In 2024, in Cantero v. Bank of America, the Supreme Court
reaffirmed the Barnett Bank standard and explained that its application
must be based on ``a practical assessment of the nature and degree of
the interference caused by a state law.'' \22\ This assessment may
include consideration of Barnett Bank and its antecedents and be based
on ``the text and structure of the laws, comparison to other
precedents, and common sense.'' \23\ In addition to Barnett Bank, the
Cantero Court specifically discussed six antecedent cases, noting that
they ``furnish content'' regarding the Barnett Bank standard:\24\
Fidelity Federal Savings & Loan Ass'n v. de la Cuesta,\25\ Franklin
National Bank of Franklin Square v. New York,\26\ First National Bank
of San Jose v. California,\27\ Anderson National Bank v. Luckett,\28\
McClellan v. Chipman,\29\ and First National Bank v. Kentucky.\30\
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\22\ 602 U.S. 205, 219-20 (2024).
\23\ Id. at 220 n.3; see id. 219-21.
\24\ Id. at 219-20. The Court also stated that ``courts
addressing preemption questions in this context must do as Barnett
Bank did and likewise take account of those prior decisions of this
Court and similar precedents.'' Id. at 215-16.
\25\ 458 U.S. 141 (1982).
\26\ 347 U.S. 373 (1954).
\27\ 262 U.S. 366 (1923).
\28\ 321 U.S. 233 (1944).
\29\ 164 U.S. 347 (1896).
\30\ 76 U.S. 353 (1869). The OCC recently proposed a preemption
determination on several State interest-on-escrow laws, which
contains an extensive discussion of these antecedent cases. See
Preemption Determination: State Interest-on-Escrow Laws, 90 FR 61093
(Dec. 30, 2025). The application of these cases to the IFPA is
discussed below.
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B. Interchange Fee Prohibition
When the OCC charters a national bank, the bank ``gains various
enumerated and incidental powers.'' \31\ For example, national banks
have express statutory authority to ``loan[ ] money on personal
security,'' ``receiv[e] deposits,'' and engage in ``all such incidental
powers as shall be necessary to carry on the business of banking.''
\32\ As the OCC and courts have long recognized, national banks thus
have broad powers to engage in activities that are part of, or
incidental to, the business of banking, including issuing payment cards
and processing payments.\33\
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\31\ Cantero, 602 U.S. at 210.
\32\ 12 U.S.C. 24 (Seventh); see also 12 CFR 7.1000.
\33\ See, e.g., OCC Conditional Approval No. 773, 2006 WL
4589434, at *1 (Nov. 30, 2006) (``[M]erchant processing activities
are part of, or incidental to, the business of banking[.]''); OCC
Corporate Decision 99-50, at 4 (Dec. 23, 1999) (``[P]rocessing
credit and debit card transactions and other electronic payments are
clearly part of the business of banking[.]''), https://www.occ.gov/topics/charters-and-licensing/interpretations-and-actions/2000/cd99-50.pdf, OCC, Conditional Approval No. 248, at 4 (June 27, 1997)
(``It is clear that merchant processing activities are permissible
for national banks[.]''), https://www.occ.gov/topics/chartersand-licensing/interpretations-and-actions/1997/ca248.pdf.
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National banks also have the authority to be compensated for the
products and services they provide, including to charge and receive
interchange fees for processing payment card transactions.\34\ To
address any confusion and expressly reaffirm this authority, at the
same time that the OCC is issuing this preemption order, the agency is
also issuing an interim final rule to amend 12 CFR 7.4002.\35\ The
interim final rule codifies national banks' authority to charge non-
interest charges and fees, specifically stating that they have the
power to ``assess, collect, impose, levy, receive, reserve, take, or
otherwise obtain'' non-interest charges and fees, including interchange
fees from payment card activity, regardless of whether those fees are
set by the bank or a third party.
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\34\ See, e.g., 12 CFR 7.4002; OCC Interpretive Letter 932 (Aug.
17, 2001) (discussing national banks' authority to charge non-
interest charges and fees), https://www.occ.treas.gov/topics/charters-and-licensing/interpretations-and-actions/2002/int932.pdf.
See also 15 U.S.C. 1693o-2 (demonstrating Congress's recognition
that credit and debit card ``issuers,'' including national banks,
may charge ``interchange transaction fees.'').
\35\ The interim final rule on non-interest charges and fees is
published elsewhere in this issue of the Federal Register.
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While Cantero, Barnett Bank, and Barnett Bank's antecedents do
``not purport to establish a clear line to demarcate'' which State laws
are and are not preempted, they offer a lens through which the standard
comes into focus.\36\ Specifically, these cases demonstrate that, at a
minimum, a State law prevents or significantly interferes with a
Federal power when it (1) interferes with critical flexibility granted
to a national bank under Federal law (Fidelity); (2) interferes with a
national bank's efficiency or effectiveness in exercising its Federal
power (Franklin); or (3) qualifies a Federal power in an unusual way
(San Jose). The interchange fee prohibition does all three.\37\
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\36\ Cantero, 602 U.S. at 215.
\37\ As the First Circuit recently observed, certain State laws
can create an ``obvious'' or direct conflict with Federal law that
results in preemption under the Barnett Bank standard. Conti v.
Citizens Bank NA, 157 F.4th 10, 17-18 (1st Cir. 2025).
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As revised, 12 CFR 7.4002 should remove any doubt that Federal law
both authorizes national banks to charge interchange fees and vests
them with wide flexibility to charge such fees in accordance with sound
business judgment and safe and sound banking principles.\38\ This
flexibility supports a
[[Page 23153]]
national bank's efficient and effective exercise of its deposit-taking,
lending, and payment processing powers, as well as its corollary
authority to be compensated. Federal law grants these powers to
national banks ``without relevant qualification,'' and as such, these
grants are ``not normally limited by, but rather ordinarily preempt[ ],
contrary state law.'' \39\ As was the case in Fidelity, where a State
law restricting the use of due-on-sale clauses interfered with the
flexibility granted by Federal law, the IFPA's interchange fee
prohibition restricts a national bank's discretion to determine the
appropriate compensation for its payment card activity, thereby
interfering with the flexibility granted by Federal law.\40\
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\38\ See Baptista v. JPMorgan Chase Bank, N.A., 640 F.3d 1194,
1198 n.2 (11th Cir. 2011) (``[T]he significant objective of 12 CFR
7.4002 is to allow national banks to charge fees and to allow banks
latitude to decide how to charge them.''). The revised 12 CFR 7.4002
also makes clear that ``charge'' means to assess, collect, impose,
levy, receive, reserve, take, or otherwise obtain, including through
a fee sharing or similar economic relationship. It also clarifies
that national banks may take such actions directly or through
intermediaries, partners, payment networks, interchanges, or other
third parties.
\39\ Barnett Bank, 517 U.S. at 32. In Barnett Bank, the State
law forbade national banks from engaging in a power (selling
insurance in small towns) that Congress had expressly authorized
``without relevant qualification'' so the State law was preempted.
Id.
\40\ See Fidelity, 458 U.S. at 155 (finding preempted a
California State law that forbade a Federal savings and loan
association from exercising a due-on-sale clause at its option and
thus ``deprived the lender of the `flexibility' '' given to it by
Federal law); see also, e.g., Gutierrez v. Wells Fargo Bank, NA, 704
F.3d 712, 723, 730 (9th Cir. 2012) (holding that ``[b]oth the
`business of banking' and the power to `receiv[e] deposits'
necessarily include the power to post transactions'' and that a
State law purporting ``to dictate a national bank's order of
posting'' is preempted (second alteration in original) (quoting 12
U.S.C. 24)), abrogated in part on other grounds by TransUnion LLC v.
Ramirez, 594 U.S. 413 (2021); Baptista, 640 F.3d at 1198 (``The
state's prohibition on charging fees to non-account-holders, which
reduces the bank's fee options by 50%, is in substantial conflict
with federal authorization to charge such fees.''); Monroe Retail,
Inc. v. RBS Citizens, N.A., 589 F.3d 274, 284 (6th Cir. 2009)
(holding that the State law would `` `significantly interfere' not
only with the [b]anks' ability to collect and set their service
fees, but also with the [b]anks' federal authority to complete other
transactions and balance their accounts'' (citation omitted)); Wells
Fargo Bank of Tex. NA v. James, 321 F.3d 488, 495 (5th Cir. 2003)
(``[N]ational banks are authorized by federal regulation 12 CFR
7.4002(a) to charge non-account holding payees a check-cashing fee.
Thus, because [the State law] prohibits the exercise of a power
which federal law expressly grants the national banks, [it] is in
irreconcilable conflict with the federal regulatory scheme, and it
is preempted by operation of the Supremacy Clause.''); Bank of Am.,
309 F.3d at 564 (``[T]he National Bank Act and OCC regulations
together preempt conflicting state limitations on the authority of
national banks to collect fees for provision of deposit and lending-
related electronic services.'').
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Franklin, which the Supreme Court described as the ``paradigmatic
example of significant interference,'' \41\ is also apt. Much like the
State law advertising restriction in Franklin,\42\ which interfered
with a national bank's efficient and effective exercise of its powers,
the IFPA's prohibition on certain interchange fees has a comparable
effect. Participation in one or more card networks supports a national
bank's efficient and effective exercise of its deposit-taking and
lending powers by providing benefits that national banks can leverage,
including expertise, technological infrastructure, and economies of
scale. For example, participation in a card network avoids the need for
national banks to engage in complex, inefficient, ineffective, and
costly bilateral negotiations with myriad counterparties to establish
the terms of payment card activity. Instead, the card networks have a
comprehensive set of rules that govern use of the network and
interactions among its participants. The card networks also provide
other important services, including risk management services to detect
and prevent fraud. This framework improves safety, certainty, and
interoperability, thereby increasing the efficiency and effectiveness
of payment card activity. Compliance with the interchange fee
prohibition, however, is likely to introduce significant complexity
into the payment card systems, including by requiring national banks to
accommodate the taxation schemes of hundreds of localities.\43\ This
jeopardizes national banks' ability to effectively and efficiently
participate in the payment card systems, and thereby exercise their
lending and deposit-taking powers, on a national scale.\44\
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\41\ Cantero, 602 U.S. at 216.
\42\ Id.; see Franklin, 347 U.S. at 377-78.
\43\ See 815 Ill. Comp. Stat. 151/150-5 (defining ``tax'' as
``any use and occupation tax or excise tax imposed by the State or a
unit of local government in the state'').
\44\ See, e.g., Rose v. Chase Bank, USA, N.A., 513 F.3d 1032,
1037-38 (9th Cir. 2008) (concluding that, under Barnett Bank and
Franklin, State disclosure requirements on certain credit products
known as convenience checks are preempted based on their
interference with a national bank's exercise of its lending power,
even though such disclosures did not directly affect the terms of
the bank's lending); Parks v. MBNA Am. Bank, N.A., 278 P.3d 1193,
1200 (Cal. 2012) (``However, to say that [a national bank] may offer
convenience checks so long as it complies with [State disclosure
laws on certain credit products] is equivalent to saying that [the
bank] may not offer convenience checks unless it complies with [the
State law]. Whether phrased as a conditional permission or as a
contingent prohibition, the effect of [the State law] is to forbid
national banks from offering credit in the form of convenience
checks unless they comply with state law.'').
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In addition, interchange fees are an important aspect of the
compensation structure that a national bank evaluates when deciding
whether to participate in a card network. These fees compensate the
bank for the cost of processing a payment card transaction, as well as
its assumption of related risks such as fraud and non-payment.\45\ The
fees also support the bank's broader payment card infrastructure, such
as its fraud detection and prevention tools, and they fund valuable
customer services like rewards programs. Under the interchange fee
prohibition, however, a national bank would be required to process the
entirety of a card transaction but be denied compensation for the
portion of the transaction related to taxes and tips. To offset the
uncompensated portion, a national bank could pursue less efficient and
less effective alternatives, such as increasing costs for credit and
debit card users, limiting or eliminating rewards programs, or
deferring investments in tools to detect and prevent fraud. For some
national banks, the consequences of this State law may even be
``business-ending.'' \46\ This interference with a national bank's
efficient and effective exercise of its powers is at least as
significant as the interference in Franklin.\47\ Indeed, it is hard to
imagine a more ``unusual'' qualification on a national bank's exercise
of its powers.\48\
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\45\ See OCC, Comptroller's Handbook, ``Merchant Processing''
32, 82 (2014); OCC, Comptroller's Handbook, ``Payment Systems'' 97
(2021) (``Payment Systems Handbook'') (describing the interchange
fee is a ``fee paid by one bank to another to handle costs and
credit risk''); Credit Card Lending Handbook, supra, at 60, 172
(``The [interchange] fee takes into account authorization costs,
fraud and credit losses, and the average bank cost of funds.'').
\46\ Ill. Bankers Ass'n, 2026 WL 371196, at *6.
\47\ See Kivett v. Flagstar Bank, FSB, 154 F.4th 640, 660 (9th
Cir. 2025) (Nelson, J., dissenting) (concluding that the advertising
restriction in Franklin ``pales in comparison to a state law that
dictates a national bank's pricing'').
\48\ See First Nat'l Bank of San Jose, 262 U.S. at 370. For
similar reasons, the interchange fee prohibition is clearly not
comparable to the State law at issue in Anderson, which applied a
rule that was as ``old as the common law itself.'' 321 U.S. at 251-
52.
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A national bank's decision to contract with a card network to
facilitate its payment card activity does not change this analysis.
National banks have clear authority to contract with third parties,\49\
and the OCC's concurrent interim final rule unambiguously reaffirms a
national bank's power to charge interchange and other fees ``set'' by
third parties. As outlined above, contracting with third parties,
including the card networks, provides many
[[Page 23154]]
benefits to a national bank. Reliance on a third-party service like a
card network is thus ``one of the most usual and useful of weapons'' in
the modern economy.\50\ Absent ``some affirmative indication'' from
Congress,\51\ then, the role of the card networks does not change the
conclusion that the interchange fee prohibition is preempted. To hold
otherwise would expose broad swaths of national bank activity to State
law that would otherwise be preempted, simply because the bank
contracts with a third party to facilitate its exercise of its powers.
Such an odd result would undermine National Bank Act preemption and the
intent of Congress.
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\49\ See, e.g., 12 U.S.C. 24 (Third); see also 12 U.S.C. 1867
(authorizing the OCC to regulate and examine certain services
performed for national banks by third parties ``to the same extent
as if such services were being performed by the [national bank]
itself,'' which further demonstrates Congress's recognition that
national banks routinely use third-party services).
\50\ See Franklin, 347 U.S. at 377.
\51\ Id.
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As the foregoing demonstrates, the nature and degree of the
interchange fee prohibition's interference with a national bank's
Federal powers is ``more akin'' to the interference in the cases where
the Court found preemption, including Franklin, Fidelity, Barnett Bank,
and San Jose.\52\ Therefore, the interchange fee prohibition ``must
give way'' to Federal law and is preempted with respect to national
banks.\53\
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\52\ Cantero also referenced three antecedent cases in which the
Court found that a State law was not preempted. In each of these
cases (Anderson, Kentucky, and McClellan), the State law at issue
was one of general applicability. See Cantero, 602 U.S. at 217-19.
These cases are inapposite to this analysis. The interchange fee
prohibition, which is targeted at payment card activity, is hardly a
law of general applicability.
\53\ See Watters v. Wachovia Bank, N.A., 550 U.S. 1, 12-13
(2007). As explained above (supra n.10), the interchange fee
prohibition is also preempted with respect to Federal savings
associations.
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C. Data Use Provision
Under Federal law, national banks have the power to use data in a
variety of ways. Specifically, as part of the business of banking,
national banks may engage in a range of services related to banking,
financial, or economic data.\54\ Banks may provide these services,
which include collecting, transcribing, analyzing, and storing data,
for themselves or others.\55\ One type of this data is transaction
data,\56\ which can be used to strengthen risk management, support
fraud analysis, tailor products and services to customer needs, and
increase operational efficiency.\57\ Accordingly, Federal regulations
and guidance afford national banks the flexibility to integrate risk
management principles ``within the bank's risk management system
commensurate with the bank's size, complexity, and risk profile,'' to
include utilizing transaction data in support of fraud detection and
prevention.\58\
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\54\ 12 CFR 7.5006(a); see also 12 CFR 7.5006(b) (discussing
when a national bank may perform these activities with respect to
other types of data).
\55\ OCC. Interpretive Letter 928, 4 (Dec. 24, 2001) https://www.occ.gov/topics/charters-and-licensing/interpretations-and-decisions/2002/int928.pdf; id. n.12 (stating that ``as part of the
business of banking, national banks may collect, transcribe,
process, analyze, and store for itself and others banking,
financial, or economic data'' and listing OCC interpretive rulings
and letters that support this view); OCC Interpretative Letter 1077,
4 (Jan. 11, 2007) https://www.occ.treas.gov/topics/charters-and-licensing/interpretations-and-decisions/2007/int1077.pdf.
\56\ 12 CFR 7.5006(a) (``[E]conomic data includes anything of
value in banking and financial decisions[.]'').
\57\ See, e.g., Payment Systems Handbook, supra, at 48
(explaining that banks use real-time monitoring of customer behavior
to identify irregular payment patterns and prevent fraud); OCC,
Federal Regulators Issue Joint Statement on the Use of Alternative
Data in Credit Underwriting, News Release 2019-142 (Dec. 3, 2019)
(attaching an interagency statement on the use of alternative data
in credit underwriting); see also OCC, Operational Risk Description:
Fraud Risk Management Principles, Bulletin 2019-37, 4 (July 24,
2019) (stating that national banks may ``deploy solutions that serve
to detect anomalies and prevent potential fraudulent transactions or
activities . . . monitor transactions and behaviors, employ layered
or multifactor authentication, monitor networks for intrusions or
malware, analyze transactions on internal bank platforms, and
compare data with consortium or publicly available data'').
\58\ OCC, Operational Risk Description, supra, at 3.
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The IFPA's data use limitation imposes a near-complete ban on a
national bank's use of electronic payment transaction data. Such a
prohibition is clearly preempted under Cantero, Barnett Bank, and
Barnett Bank's antecedents. As was the case with the preempted State
law addressed in Barnett Bank, the IFPA purports to prohibit a national
bank from exercising a broad and unqualified Federal power--use of
transaction data. Compliance with the IFPA would thus deprive a
national bank of its flexibility to use transaction data for
innumerable important purposes, including as a critical element of
fraud and cybersecurity risk management. This deprivation clearly runs
afoul of Fidelity. As such, the data use limitation would undermine not
only a national bank's efficient and effective operations but also its
ability to manage risks in a safe and sound manner. This clearly
exceeds the significant interference identified that resulted in
preemption in Franklin and imposes a far more ``unusual qualification''
than the preempted State law in San Jose. Accordingly, the data use
limitation unambiguously prevents or significantly interferes with
national banks' exercise of their Federally authorized powers.\59\
---------------------------------------------------------------------------
\59\ See supra n.10.
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D. The Patchwork Effect
Ultimately, the IFPA will create significant uncertainty for
consumers and impose incredible operational challenges for national
banks and other participants in the nation's card networks. In addition
to the challenges with complying with the IFPA alone, other States and
localities could enact laws governing interchange fees and use of
transaction data. Some of these laws may be substantially similar to
the IFPA while others could differ vastly.\60\ Such a fractured
patchwork of State laws would undermine the uniformity necessary for
the functioning of the nation's payment card systems, thereby
materially disrupting interstate commerce.\61\ This is precisely what
preemption, as provided for in the U.S. Constitution, is designed to
address.
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\60\ See First Nat'l Bank of San Jose, 262 U.S. at 370 (``If
California may thus interfere other states may do likewise; and . .
. varying limitations may be prescribed.''); see also Kivett, 154 F.
4th at 662-63 (Nelson, J., dissenting) (citing Watters, 550 U.S. at
13-14, and Easton v. Iowa, 188 U.S. 220, 229 (1903)).
\61\ Cf. Marquette Nat'l Bank of Minneapolis v. First of Omaha
Serv. Corp., 439 U.S. 299, 312 (declining to interpret Federal law
to incorporate State law in a way that would ``throw into confusion
the complex system of modern interstate banking'').
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IV. Order
The National Bank Act, the Home Owners' Loan Act, and the
regulations promulgated thereunder preempt the IFPA's interchange fee
prohibition and, separately, the IFPA's data use limitation with
respect to national banks and Federal savings associations.\62\
National banks and Federal savings associations are neither subject to
nor required to comply with these provisions of State law.
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\62\ The OCC's preemption conclusions with respect to the
interchange fee prohibition and data use limitation are separate and
severable from one another. The OCC has determined that these
conclusions operate independently. Accordingly, if either conclusion
is vacated, overruled, or otherwise disturbed, it is the OCC's
intention that the remaining conclusion remains in effect, which
will provide clarity to stakeholders.
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V. Preemption Procedures
A. 12 U.S.C. 25b
As part of Dodd-Frank, Congress established procedural requirements
for OCC ``preemption determinations.'' A preemption determination is an
OCC regulation or order that concludes that a ``State consumer
financial law'' is preempted in accordance with the Barnett Bank
standard.\63\ A State consumer financial law is ``a State law that . .
. directly and specifically regulates the manner, content, or terms
[[Page 23155]]
and conditions of any financial transaction . . . or any account
related thereto, with respect to a consumer.'' \64\
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\63\ 12 U.S.C. 25b(b)(1)(B).
\64\ 12 U.S.C. 25b(a)(2).
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The IFPA is not a ``State consumer financial law.'' Although the
interchange fee prohibition may directly and specifically regulate the
manner, content, or terms and conditions of a financial transaction,
the relevant interchange fee transaction is between a merchant and the
other participants in the card network (e.g., issuer bank, acquirer
bank), rather than a consumer. Similarly, the data use limitation does
not directly and specifically regulate a financial transaction or a
related account. Instead, it limits how a national bank may use data
generally. Therefore, this order is not a ``preemption determination''
within the meaning of 12 U.S.C. 25b.\65\
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\65\ Even if the IFPA were a State consumer financial law, the
preemption standard and analysis would be the same under 12 U.S.C.
25b(b)(1)(B), which incorporates the Barnett Bank standard. See
Cantero, 602 U.S. at 214 n.2.
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B. 12 U.S.C. 43
Under 12 U.S.C. 43, the OCC generally must provide notice and at
least 30 days for comment before issuing ``any opinion letter or
interpretive rule'' concluding that ``Federal law preempts the
application to a national bank of any State law'' relating to specified
categories, including consumer protection.\66\ While there are strong
arguments that section 43 does not apply to this order, the OCC does
not need to affirmatively reach this conclusion. Section 43 permits the
OCC to make exceptions to the notice-and-comment requirement if the
agency ``determines in writing that the exception is necessary to avoid
a serious and imminent threat to the safety and soundness of any
national bank.'' \67\
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\66\ 12 U.S.C. 43(a). Under paragraph (b), the OCC must publish
any final such opinion letter or interpretive rule in the Federal
Register.
\67\ 12 U.S.C. 43(c)(3).
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As explained in the interim final rule that the OCC is publishing
concurrently with this order, the IFPA creates a complex and
potentially unworkable standard, and it imposes significant potential
liability for non-compliance. Therefore, national banks may take
drastic actions to avoid these risks, up to and including declining
payment card transactions subject to the IFPA.\68\ Given the complexity
of the payment card systems and the modern economy, these effects may
not be limited to Illinois.
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\68\ E.g., Letter from H. Carney, Executive Vice President,
Financial Institution Policy & Regulatory Affairs, American Bankers
Association, to W. Giles, Principal Deputy Chief Counsel, OCC at 3
(March 30, 2026) (ABA Letter) (``We are also hearing that some
issuing financial institutions--particularly smaller and mid-sized
banks--are concluding that the IFPA's risks and costs are too great,
and have indicated they may simply cease issuing credit or debit
cards to their customers, while also exploring options for declining
card transactions in Illinois.'').
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For national banks that choose to continue to support these payment
card transactions, the OCC understands that these banks will need to
inform customers, in advance of the IFPA's July 1 effective date, that
the terms and conditions of their payment cards may soon change.\69\
The OCC also understands that national banks will need to inform
merchants about possible changes, including updates to how they process
payments, the need for new software or hardware, or that some
transactions may be declined.\70\ These communications, as well as the
potential for national banks to stop supporting covered payment card
transactions, may generate significant customer and merchant confusion
about whether, or how, payment cards will work after the IFPA's
effective date. These potential actions may cause doubt about continued
access to basic lending and deposit services, which could lead to
economic harm and disruption and pose significant risks to the safety
and soundness of national banks and the national banking system as a
whole.
---------------------------------------------------------------------------
\69\ Id.
\70\ Id.
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With respect to the data use provision, compliance could also
seriously and imminently threaten the safety and soundness of national
banks. As discussed above, national banks use transaction data for a
variety of critical purposes in support of their safety and soundness,
including risk management and fraud detection and prevention.
Preventing national banks from using data for these purposes would
place them in an untenable position, fraught with both known and
unknown risks. National banks face unrelenting threats from fraudsters,
cybercriminals, and other malicious actors; the IFPA would deny them
access to the tools necessary to combat these serious and imminent
threats.
For these reasons, the OCC determines that, if section 43 were to
apply to this order, an exception to section 43's notice-and-comment
requirement is necessary to avoid a serious and imminent threat to the
safety and soundness of national banks.\71\
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\71\ In addition, section 43 does not apply when the OCC's
action ``raises issues of Federal preemption of State law that are
essentially identical to those previously resolved by the courts.''
12 U.S.C. 43(c)(1). The U.S. District Court for the Northern
District of Illinois has addressed whether the National Bank Act
preempts the IFPA and resolved this in the affirmative for the data
use limitation. Therefore, the OCC concludes that, at a minimum,
preemption of the data use limitation raises essentially identical
preemption issues to those that have been resolved by a court.
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VI. Other Analysis
A. Administrative Procedure Act
The OCC is issuing this interim final order without prior notice
and the opportunity for public comment. These Administrative Procedure
Act (APA) requirements, codified at 5 U.S.C. 553, apply to agency
rulemakings and are thus inapplicable to this order.
In addition, even if these requirements were applicable, the APA
provides that notice-and-comment is not required when an ``agency for
good cause finds (and incorporates the finding and a brief statement of
reasons therefor in the rules issued) that notice and public procedure
thereon are impracticable, unnecessary, or contrary to the public
interest.'' \72\ Consistent with the discussion above and as explained
in the OCC's concurrent interim final rule, the OCC has good cause
because notice-and-comment is impracticable. Nevertheless, the agency
is interested in the views of the public and requests comment on all
aspects of this interim final order.
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\72\ 5 U.S.C. 553(b)(B).
---------------------------------------------------------------------------
B. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 (PRA),\73\ the OCC may
not conduct or sponsor, and a respondent is not required to respond to,
an information collection unless it displays a currently valid Office
of Management and Budget (OMB) control number. The OCC has reviewed
this interim final order and determined that it does not create any new
or revise any existing collections of information. Accordingly, no PRA
submissions to OMB will be made with respect to this interim final
order.
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\73\ 44 U.S.C. 3501-21.
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C. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA) \74\ requires an agency to
consider whether the rules it proposes will have a significant economic
impact on a substantial number of small entities.\75\ The RFA applies
only to rules for which an agency publishes a general notice of
[[Page 23156]]
proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed above,
the OCC is acting by order, rather than by rule. Further, consistent
with Sec. 553(b)(B) of the APA, the OCC has determined for good cause
that general notice and opportunity for public comment is
impracticable. Therefore, the RFA's requirements relating to initial
and final regulatory flexibility analysis do not apply to this interim
final order.
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\74\ 5 U.S.C. 601 et seq.
\75\ Under regulations issued by the Small Business
Administration (SBA), as of June 2025, a small entity includes a
depository institution, bank holding company, or savings and loan
holding company with total assets of $850 million or less and trust
companies with total assets of $47 million or less. The SBA may
adjust these thresholds annually, so check the citation for the most
recent asset thresholds. See 13 CFR 121.201.
---------------------------------------------------------------------------
While not required, the OCC evaluated whether the interim final
order will have a significant economic impact on a substantial number
of small entities. The OCC currently supervises approximately 609 small
entities, all of which will be impacted by the interim final order.
In general, the OCC classifies the economic impact on an individual
small entity as significant if the total estimated impact in one year
is greater than 5 percent of the small entity's total annual salaries
and benefits or greater than 2.5 percent of the small entity's total
non-interest expense. Furthermore, the OCC considers 5 percent or more
of OCC-supervised small entities to be a substantial number. Thus, at
present, 30 OCC-supervised small entities would constitute a
substantial number. Therefore, since the interim final order will
affect all OCC-supervised banks, a substantial number of OCC-supervised
small entities would be impacted.
However, the interim final order imposes no new mandates, and thus
no direct costs, on affected OCC-supervised institutions. Therefore,
the OCC believes that the interim final order will not have a
significant economic impact on a substantial number of small entities.
D. Unfunded Mandates Reform Act of 1995
As a general matter, the Unfunded Mandates Reform Act of 1995
(UMRA) requires the preparation of a budgetary impact statement before
promulgating a rule that includes a Federal mandate that may result in
the expenditure by State, local, and tribal governments, in the
aggregate, or by the private sector, of $100 million or more in any one
year ($193 million as adjusted annually for inflation).\76\ However,
the UMRA does not apply to final rules for which a general notice of
proposed rulemaking was not published. As discussed above, the OCC is
acting by order, rather than by rule. Further, consistent with Sec.
553(b)(B) of the APA, the OCC has determined for good cause that
general notice and opportunity for public comment is impracticable.
While not required, the OCC has analyzed the interim final order under
the factors in UMRA. Because this interim final order imposes no new
mandates, it will not require additional expenditure of $193 million or
more annually by any State, local, or tribal governments, in the
aggregate, or by the private sector. Accordingly, for these reasons,
the OCC has not prepared the written statement described in Sec. 202
of UMRA.
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\76\ 2 U.S.C. 1531 et seq.
---------------------------------------------------------------------------
E. Riegle Community Development and Regulatory Improvement Act of 1994
Pursuant to Sec. 302(a) of the Riegle Community Development and
Regulatory Improvement Act (RCDRIA) of 1994,\77\ in determining the
effective date and administrative compliance requirements for new
regulations that impose additional reporting, disclosure, or other
requirements on insured depository institutions, the OCC must consider,
consistent with principles of safety and soundness and the public
interest, (1) any administrative burdens that the final rule would
place on depository institutions, including small depository
institutions and customers of depository institutions and (2) the
benefits of the final rule. As discussed above, the OCC is acting by
order, rather than by regulation. In addition, this order does not
impose any reporting, disclosure, or other requirements on insured
depository institutions. Therefore, for these reasons, Sec. 302(a)
does not apply to this interim final order.
---------------------------------------------------------------------------
\77\ 12 U.S.C. 4802(a).
---------------------------------------------------------------------------
F. Executive Orders 12866 and 14192
The Office of Information and Regulatory Affairs has determined
that this interim final order is economically significant as defined by
section 3(f)(1) of Executive Order 12866. The OCC conducted an analysis
consistent with Executive Order 12866.\78\ If OCC-supervised banks were
required to comply with the IFPA, they would incur costs (1) to upgrade
their systems to transmit tax and gratuity information when interfacing
with other participants in the payment card systems, including
merchants and card networks; and (2) to manually process tax
documentation. With respect to system upgrades, we estimate an initial
cost savings of more than $232 million, of which $72 million would
accrue to acquirer banks and $160 million to issuer banks. With respect
to manually processing tax documentation, we estimate cost savings of
$145 million per year for the first several years, of which $121
million would accrue to acquirer banks and $24 million to issuer banks.
In addition, if OCC-supervised issuer banks were required to comply
with the IFPA, these issuer banks would no longer receive revenue from
the interchange fees on taxes and gratuity in Illinois for payment
cards. We estimate that OCC-supervised card issuers would lose a total
of $200 million of revenue if required to comply with the IFPA.\79\ The
OCC's quantification of these effects is described below.
---------------------------------------------------------------------------
\78\ The analysis uses a baseline that assumes that OCC-
supervised institutions would be required to comply with the
interchange fee prohibition but not the data use limitation of IFPA
on July 1, 2026. In addition, the OCC based its analysis on publicly
available data and made assumptions as described throughout.
Accordingly, these estimates may be imprecise.
\79\ There may also be indirect impacts for acquirer and issuer
banks, card networks, merchants, and others. Because these indirect
impacts are difficult to determine, they are not included in our
estimates.
---------------------------------------------------------------------------
However, as discussed above and in the interim final rule published
concurrently with this order, the IFPA creates a complex and
potentially unworkable standard. There is substantial uncertainty about
whether and how banks can implement these changes by the IFPA's
effective date, which may lead to banks to take drastic actions. Other
costs and negative effects to the national banking system and the U.S.
economy associated with these actions, including the customer confusion
and doubt about continued access to basic lending and deposit services,
were not as readily quantified under the circumstances but are
nonetheless grave risks.
Estimated Direct Cost Savings
A. Cost Savings to Acquirer Banks
Based on Consolidated Reports of Condition and Income (Call Report)
data, we estimate that there are approximately 49 OCC-supervised
acquirer banks, six of which operate some or all of their own core
payment card processing systems. One of these banks estimated a one-
time cost of $16 million to upgrade its systems to comply with the
IFPA.\80\ These costs are mainly related to software development, and
as such, we do not expect the cost to vary with institution size. We
assume that the institutions that fully operate their own systems will
incur the same cost of $16 million each, while those that operate only
some of their systems will incur half the cost. We believe that the
remaining OCC-supervised acquirer banks would not incur any direct
upfront system upgrade costs, as we expect these costs will be absorbed
by core payment service providers
[[Page 23157]]
instead.\81\ We thus estimate that, absent this interim final order,
OCC-supervised acquirer banks would incur a one-time system upgrade
cost of $72 million.
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\80\ Declaration of Mark C. Williams ] 15, Ill. Bankers Ass'n v.
Raoul, No. 24-cv-07307 (N.D. Ill. Aug. 21, 2024) (Decl. M.
Williams).
\81\ While these providers may pass costs on to their client
acquirer banks over time, we do not have sufficient information to
estimate this cost.
---------------------------------------------------------------------------
If merchants elect to submit tax documentation manually to their
acquirer bank, the bank will also incur costs. One acquirer bank with
an acquiring transaction volume of 400 million in Illinois estimates
that implementing this process may cost up to $50 million per year.\82\
This acquirer bank's sales volume amounts to 41 percent of total sales
volume for all OCC acquirer banks.\83\ Assuming that this acquirer's
share of paper submission costs is the same as its share of total sales
volume, we estimate that the total paper submission cost is $121
million for all OCC acquirer banks.
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\82\ Decl. M. Williams, supra, ] 22.
\83\ See Call Report, Schedule RC-L, Item 11.a and 11.b.
---------------------------------------------------------------------------
B. Cost Savings to Issuer Banks
Based on Call Report data, there are approximately 152 banks that
issue both credit cards and debit cards, one that issues only credit
cards, and 702 that only issue debit cards. We first evaluate the cost
savings for credit card issuer banks. Six of these issuer banks process
their own payment card transactions or have hybrid processing models,
while the rest outsource the processing to other providers. The largest
system upgrade costs would be incurred by issuer banks who operate
their own processing. One large issuer that conducts its own credit
card processing estimates system upgrade costs of $25 million.\84\ We
assume that this cost is for software development, that this cost does
not vary with issuer size, and that costs for issuers with a hybrid
processing model are half. We thus estimate that total upgrade costs
are $137.5 million. Issuers that outsource their processing will incur
considerably lower upfront system upgrade costs. One smaller
institution estimates that system upgrades for interfacing with two
credit card and two debit card networks would cost $45,000.\85\ Thus,
we estimate that the remaining 147 credit card issuers may spend an
additional $6.6 million. We next estimate costs for the 702 banks that
issue only debit cards. We assume that they participate in two debit
card networks (the minimum required) \86\ and that their upgrade costs
would be $22,500 per institution (half of the cost upgrading to
interface with four networks noted above). Thus, we estimate that the
combined upgrade cost would be $16 million. Overall, we estimate the
combined system upgrade costs for all OCC-supervised issuer banks would
be $160 million.
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\84\ Declaration of Christopher Conrad ] 19, Ill. Bankers Ass'n
v. Raoul, No. 24-cv-07307 (N.D. Ill. Aug. 21, 2024) (Decl. C.
Conrad).
\85\ Declaration of Hope M. Garrett ] 16, Ill. Bankers Ass'n v.
Raoul, No. 24-cv-07307 (N.D. Ill. Aug. 21, 2024) (Decl. H. Garrett).
\86\ See 12 CFR 235.7(a)(1).
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With respect to manually processing tax documentation, one issuer
bank estimates that it would require at least 100 analysts,\87\ which
we estimate would cost $4.5 million per year.\88\ According to the Call
Report, this issuer accounts for 19% of total credit card balances for
all OCC-supervised banks. Assuming that this bank therefore also
accounts for 19% of costs related to paper submissions, the estimated
cost for paper submission for all OCC-supervised issuer banks is $24
million.
---------------------------------------------------------------------------
\87\ See Decl. C. Conrad, supra ] 22.
\88\ See Decl. M. Williams, supra ] 22.
---------------------------------------------------------------------------
Estimated Revenue Impacts for Issuer Banks
A. Tax
To estimate this revenue impact for credit cards, we used publicly
available, aggregate Y-14M data from the Federal Reserve.\89\ We scale
to total market based on the reported share of credit card balance of
four-fifths of total U.S. bankcard balances,\90\ and we assume that
OCC-supervised institutions hold 81.2 percent of the credit card
purchase volumes.\91\ We also assume that the share of Illinois
interchange fee income for a credit card issuer is 3.9 percent of its
total revenue from interchange fees \92\ and that only Illinois' sales
taxes of 6.25 percent applies.\93\ Finally, we use 2 percent to
calculate the interchange fee revenue for credit cards. Based on this
analysis, we estimate that OCC-supervised credit card issuer banks
would lose approximately $173 million of interchange fee revenue if
required to comply with the IFPA.
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\89\ Federal Reserve Bank of Philadelphia, Large Bank Consumer
Credit Card Balances: Total Purchase Volume, https://fred.stlouisfed.org/series/RCCCBPURCHASETOT, April 10, 2026; Federal
Reserve Bank of Philadelphia, FR Y-14M Data, https://www.philadelphiafed.org/surveys-and-data/large-bank-credit-card-and-mortgage-data, April 10, 2026. This data is limited to consumer
credit cards for largest banks.
\90\ Federal Reserve Bank of Philadelphia, FR Y-14M Data,
https://www.philadelphiafed.org/surveys-and-data/large-bank-credit-card-and-mortgage-data, April 10, 2026.
\91\ See Office of Comptroller of the Currency, 2025 Annual
Report, https://www.occ.gov/publications-and-resources/publications/annual-report/files/2025-annual-report.pdf.
\92\ See U.S. Bureau of Economic Analysis (BEA), SQGDP1 State
Quarterly Gross Domestic Product Summary (accessed Thursday, April
9, 2026) (indicating Illinois's share of the current United States
dollar Gross Domestic Product in 2025 is 3.9 percent).
\93\ See 35 ILCS 105/1 to 105/22. We do not account for the
local and excise taxes that are also subject to the IFPA.
---------------------------------------------------------------------------
With respect to debit cards, we estimate this revenue impact using
publicly available, aggregate Y-14M data from the Federal Reserve.\94\
We assume the following: OCC-supervised institutions hold 81.2 percent
of relevant purchase volumes; the ratio of debit card purchase volume
to credit card purchase volume is 82 percent; \95\ the share of
Illinois interchange fee income for a debit card issuer is 3.9 percent
of its total revenue from debit card interchange fees; the share of
interchange fee income attributable to Illinois sales taxes is 6.25
percent; and an interchange fee of 0.05 percent for all OCC-supervised
banks.\96\ Accordingly, we estimate that OCC-supervised debit card
issuer banks would lose approximately $4 million of interchange fee
revenue if required to comply with the IFPA.
---------------------------------------------------------------------------
\94\ Federal Reserve Bank of Philadelphia, Large Bank Consumer
Credit Card Balances: Total Purchase Volume, https://fred.stlouisfed.org/series/RCCCBPURCHASETOT, April 10, 2026; Federal
Reserve Bank of Philadelphia, FR Y-14M Data, https://www.philadelphiafed.org/surveys-and-data/large-bank-credit-card-and-mortgage-data, April 10, 2026.
\95\ See Federal Reserve, Federal Reserve Payments Study, 2024
Accessible Version of Trends in Noncash Payments (March 6, 2025).
\96\ See 12 CFR 235.3 (applicable to issuers with total assets
equal to or greater than $10 billion).
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B. Gratuity
To calculate the impact of removing interchange fees on tips, we
rely on reported income in Illinois from occupations that are
traditionally associated with tips such as Food Services, Waiters and
Waitresses, Bartenders, etc.\97\ We assume that approximately 55
percent of this income is from tips and 15 percent of these tips are
paid in cash. We use the same ratio of debit to credit card purchase
volume to split the tips paid with cards into those paid with a credit
card (55 percent) and those paid with a debit card (45 percent) to
differentiate the applicable interchange fees. We apply the same
average interchange fee of 2 percent for credit cards and .05 percent
for debit cards. We also assume that OCC issuers hold 81.2 percent of
payment card balances and purchase volumes. Accordingly, we estimate
that OCC-supervised card issuers would lose approximately $23 million
of
[[Page 23158]]
interchange fees related to tips if required comply with the IFPA.
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\97\ Bureau of Labor Statistics, May 2023 State Occupational
Employment and Wage Estimates, https://www.bls.gov/oes/2023/may/oes_il.html (inflation adjusted to 2025).
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Executive Order 14192, titled ``Unleashing Prosperity Through
Deregulation,'' separately requires that an agency, unless prohibited
by law, identify at least 10 existing regulations to be repealed when
the agency publicly proposes for notice and comment or otherwise
promulgates a new regulation with total costs greater than zero.
Executive Order 14192 further requires that new incremental costs
associated with new regulations shall, to the extent permitted by law,
be offset by the elimination of existing costs associated with at least
ten prior regulations. The OCC has determined that the interim final
order will be a deregulatory action under Executive Order 14192 because
it will result in cost savings for OCC-supervised institutions as
discussed above. The OCC estimates that this rule generates $37 million
in annualized cost savings at a seven percent discount rate, discounted
relative to year 2024, over a perpetual time horizon.
G. Congressional Review Act
Because the OCC is acting by order, rather than by rule, the OCC
believes that Subtitle E of the Small Business Regulatory Enforcement
Fairness Act of 1996 (also known as the Congressional Review Act) \98\
does not apply. Nevertheless, the OCC will submit the interim final
order and other appropriate reports to Congress and the Government
Accountability Office for review.
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\98\ 5 U.S.C. 801 et seq.
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H. Providing Accountability Through Transparency Act of 2023
The Providing Accountability Through Transparency Act of 2023 \99\
requires that a notice of proposed rulemaking include the internet
address of a summary of not more than 100 words in length of a proposed
rule, in plain language, that shall be posted on the internet website
www.regulations.gov. While the OCC is not issuing a notice of proposed
rulemaking, a summary of this interim final order can be found below
and at https://occ.gov/topics/laws-and-regulations/occ-regulations/proposed-issuances/index-proposed-issuances.html.
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\99\ 5 U.S.C. 553(b)(4).
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The OCC is issuing an interim final order concluding that Federal
law preempts the Illinois Interchange Fee Prohibition Act, which
purports to (1) prohibit national banks and Federal savings
associations from charging or receiving interchange fees on the tax and
gratuity portions of payment card transactions; and (2) restrict the
use of payment card transaction data. The OCC invites public comments
on this interim final order.
Katherine S. Tyrrell,
First Deputy Comptroller of the Currency.
[FR Doc. 2026-08341 Filed 4-28-26; 8:45 am]
BILLING CODE 4810-33-P