MVA White Collar Defense, Investigations, and Regulatory Advice Blog

On April 24, 2026, the Office of the Comptroller of the Currency (OCC) issued two coordinated interim final actions:

• an Interim Final Rule amending 12 CFR § 7.4002 governing national bank non‑interest charges and fees (the “Interim Final Rule”)[1], and
• an Interim Final Order preempting Illinois’s Interchange Fee Prohibition Act (IFPA) under the National Bank Act (NBA) and Home Owners’ Loan Act (HOLA) (the “Interim Final Order”).

Together, these actions are intended to reaffirm the authority of national banks under federal law to earn and receive interchange fees and to prevent the imminent application of Illinois’s first‑of‑its‑kind state interchange fee restrictions to OCC‑regulated institutions. Both actions are effective June 30, 2026, and both are subject to a post‑issuance comment period.

Urgency Created by the IFPA

The IFPA, enacted in 2024 and now scheduled to become effective on July 1, 2026, prohibits (i) banks, the card networks, and system participants from charging or receiving interchange fees on the amount of a transaction attributable to taxes and tips, and (ii) anyone other than the merchant, from using the transactional data for purposes other than for facilitating or processing the transaction. The Illinois Bankers Association and other bank trade associations sought an injunction from Illinois’ enforcement of the IFPA on multiple grounds, including that the IFPA’s prohibitions were preempted by the NBA. After issuing preliminary (and partial) injunctions,[2] the U.S. District Court for the Northern District of Illinois (the “District Court”) recently issued a final order (i) denying an injunction of the IFPA’s fee restrictions and (ii) granting a permanent injunction from enforcement of the data usage restrictions. Illinois Bankers Association et. al. v. Raoul, --- F. Supp. 3d ---, 2026 WL 371196 (N.D. Ill. Feb. 10, 2026).

In denying an injunction from the IFPA’s interchange fee restrictions, the District Court concluded that the restrictions:

• did not conflict with any Federal law as interchange fees are set by the card networks and not by the banks, who may otherwise set their own charges for non-interest compensation under 12 CFR § 7.4002; and
• while “indisputably disruptive” and presenting complex compliance challenges, do not otherwise “significantly interfere” with the banks authorities as the card networks and banks built the systems giving rise to the complexity.

The parties have appealed, with the Seventh Circuit granting the appeal and scheduling oral argument in May. With the industry facing a looming compliance deadline only two months away and potential civil penalties of up to $1,000 per transaction for noncompliance, the OCC has taken steps to amend § 7.4002 to address the District Court’s limited reading of the provision and to affirmatively preempt the IFPA. The OCC’s actions become more urgent as other states are considering similar legislation.

Interim Final Rule: Clarifying National Bank Non‑Interest Charges and Fees Authority

The OCC rejected the District Court’s reading of § 7.4002 that it did not extend to the ability of national banks to charge fees set by third parties, which the OCC characterized as inconsistent with the OCC’s long-standing interpretation of the provision as covering all non-interest compensation for a bank’s products and services, regardless of whether a third party may have a role in setting the compensation. As a result, the OCC amended 12 CFR § 7.4002 to explicitly clarify the scope of a national’s bank’s authority to assess and receive non-interest rate charges and fees by:

• including a new definition of “charge” that encompasses non-interest compensation that is both directly charged by the bank but also covers compensation assessed, received or collected indirectly through intermediaries, expressly including payment networks and interchanges;
• providing that a national bank’s non-interest compensation includes deposit account service charges and interchange fees;
• removing references to “customer” non-interest charges and fees to clarify further that the power to receive non-interest compensation is not limited to the bank receiving the compensation directly from a customer receiving a bank product or service, and
• adding to the existing factors banks should consider in establishing non-interest compensation a new factor addressing the use of third parties to provide or facilitate provision of the bank’s products or services.

The IFPA’s fee restrictions will now be explicitly in conflict with Federal law once the rule becomes effective on June 30, 2026, and therefore in conflict the Supremacy Clause of the U.S. Constitution.

In issuing the Interim Final Rule, which is effective June 30, 2026, the OCC noted that the rule:

• would be made available for public comment and that issuance as an interim final rule had been necessary given the confusion and impacts to the industry and its customers created by the District Court’s decision, only four months before the IFPA is scheduled to become effective;
• is consistent with the Administration’s deregulatory agenda, and
• is a “major rule” subject to the Congressional Review Act, which allows Congress, through a joint resolution signed by the President, to overturn a Federal regulation generally within sixty days of its finalization by the agency.

Interim Final Order: NBA and HOLA Preemption of the IFPA

Separate from the Interim Final Rule, the OCC issued the Interim Final Order that includes an analysis of the IFPA under Cantero v. Bank of America, N.A., 602 U.S. 205 (2024), Barnett Bank v. Nelson, 517 U.S. 25 (1996), and related Supreme Court NBA preemption cases. The Interim Final Order concludes that the IFPA’s interchange fee and data usage prohibitions are preempted as applied to national banks and federal savings associations. The OCC’s order highlights that the IFPA’s fee restrictions run afoul of at least three preemption standards articulated by the Supreme Court:

• interference with critical flexibility granted to national banks by Federal law, citing Fidelity Federal Savings & Loan Association v. De la Cuesta, 458 U.S. 141 (1982) (preempting state law that restricted bank flexibility under Federal law to use due on sale clauses);
• interference with the efficient and effective operations of a national bank in the exercise of its Federal powers, citing Franklin National Bank of Franklin Square v. New York, 347 U.S. 373 (1954) (preempting state law that restricted bank advertising of savings deposit products), and
• qualification of a Federal power in an unusual way, citing First National Bank of San Jose v. California, 262 U.S. 366 (1923).

The OCC stated that, notwithstanding what it characterized as the District Court’s misinterpretation of § 7.4002, its contemporaneous rulemaking eliminates any doubt that the IFPA’s fee restrictions constrain national banks’ flexibility to receive non‑interest compensation for their products and services and are therefore preempted under the Fidelity standard. The OCC further concluded that the IFPA significantly interferes with banks’ decisions to participate in card network systems, whose infrastructure, expertise, and rules provide a far more efficient and effective means of delivering transactional services than would be possible through each bank entering into numerous bilateral agreements.

The OCC also reasoned that the IFPA is preempted under Franklin because it diminishes the effectiveness and efficiency of banks’ use of card networks by denying compensation for portions of their transactional services in choosing to use them and requiring banks to separately account for the tax rules of hundreds of Illinois localities. In addition, the OCC warned that compliance costs could force banks to raise costs to card users, curtail or eliminate rewards programs, or defer fraud‑prevention investments, imposing an “unusual qualification” on the exercise of federal banking powers similar to the state law invalidated in San Jose.

With respect to the IFPA’s data‑usage provisions, the OCC characterized the statute as a near‑complete ban on uses of transaction data that federal law otherwise permits, including for risk management and product development. The OCC emphasized that these restrictions not only reduce banks’ lawful flexibility to use data, rendering them preempted under the Fidelity standard, but also impair fraud prevention and other risk‑management functions, constituting another “unusual qualification” under San Jose that undermines effective and efficient, safe and sound bank operations under Franklin. The OCC further cautioned that, while compliance challenges in Illinois alone may be substantial, the risk of other states adopting similar laws threatens to create a fractured patchwork of regulations that NBA preemption was designed to prevent.

Finally, the OCC concluded that, given the IFPA’s complex operational impact on banks and the potential for significant penalties for noncompliance, the Interim Final Order was exempt from generally applicable notice‑and‑comment requirements and that it also was consistent with the Administration’s deregulatory agenda.

Implications of the OCC’s Actions and Unanswered Questions

It remains uncertain whether the OCC’s actions will, as a practical matter, protect national banks from the loss of interchange fees on Illinois card transactions in the short term. Absent state action to delay the IFPA’s effective date or a Seventh Circuit order temporarily enjoining its enforcement as to all parties, card networks, which do not benefit from the OCC’s order, may face a difficult choice that could have repercussions for banks. If payment systems cannot be modified in time to comply with the looming compliance deadline in July, the card networks may risk significant fines unless interchange fees are suppressed or curtailed or Illinois transactions are declined for processing altogether, decisions which all may carry substantial litigation risk. Accordingly, while the OCC’s actions may reduce banks’ direct enforcement exposure, it is unclear whether payment systems will be operationally prepared by July to distinguish permissible from impermissible fee components and recipients.

It also remains uncertain how much deference the Seventh Circuit will afford the OCC’s interpretation that the NBA’s incidental powers clause authorizes national banks to charge and receive non‑interest compensation, including those involving non‑customer third parties. That interpretation is central to, though not the sole grounds for, the OCC’s preemption determination, as its codification in amended § 7.4002 places the IFPA in direct conflict with federal law and the preemption standard in Fidelity. [3] The Seventh Circuit may also examine whether the OCC complied with applicable procedural requirements in issuing its determination.[4] The OCC concluded that the IFPA is not a “state consumer financial law” and therefore not subject to Dodd‑Frank’s procedural requirements for an OCC preemption determination. If the Seventh Circuit disagrees, the OCC may have been required to consult with the CFPB, and the Seventh Circuit also would be obligated to assess the thoroughness, reasoning, consistency, and other factors supporting the OCC’s determination.

While the practical effects of the OCC’s rulemaking and order remain uncertain, the agency’s commitment to aggressively defending NBA preemption principles is unmistakable. The OCC’s interim final rule and order concerning interchange fees follow a similar strategy in response to state laws mandating interest on mortgage escrow accounts. After the First and Ninth Circuits both upheld such laws against NBA preemption challenges, and with a Second Circuit decision still pending, the OCC proposed a rule authorizing banks to set escrow account terms, including whether to pay interest, coupled with a determination that state interest‑on‑escrow mandates are preempted. [5]

We will continue to monitor the Seventh Circuit’s consideration of the IFPA and NBA preemption issues, as well as developments in the mortgage escrow interest litigation and related OCC rulemaking and preemption determinations.

[1] The Interim Final Rule does not amend the OCC’s regulations applicable to Federal savings associations, although the OCC noted that it interprets Federal law, including 12 CFR § 145.17, as providing Federal savings associations with authority comparable to the authority afforded to national banks under 12 CFR § 7.4002.

[2] Please see our prior blog post discussing the preliminary injunction and the Court’s reasoning, available here.

[3] As discussed earlier, the OCC also determined that the fee provisions were preempted on separate grounds under the standards of Franklin and San Jose.

[4] The OCC determined that the IFPA does not directly and specifically regulate the terms of a transaction with a consumer as the fee terms are with a merchant and that the IFPA’s data usage restrictions do not directly and specifically regulate a financial transaction or related account.

[5] https://www.occ.treas.gov/news-issuances/news-releases/2025/nr-occ-2025-133.html