The Office of the Comptroller of the Currency (OCC) issued an interim final rule clarifying the law for national banks to charge certain fees.
The preexisting powers under federal law have recently come into question relative to the Illinois Interchange Fee Prohibition Act (IFPA). The IFPA, which goes into effect on July 1, would create a complex, potentially unworkable, and destabilizing standard for national banks, Federal savings associations, and payment card systems.
Further, such effects could be exacerbated if other states impose similar standards, according to the OCC.
The interim final order confirms that Federal law preempts the IFPA, expressly providing that national banks and Federal savings associations are not required to comply with this State law. This OCC action is designed to prevent the imminent negative effects of the State law’s application to OCC-regulated banks. They do not affect the applicability of any other Federal laws that do or may in the future apply to banks regarding payment card activities.
The OCC is accepting comments on the interim final order for 30 days after publication in the Federal Register.
The action drew the support of several banking organizations, including the Illinois Bankers Association, Illinois Credit Union League, American Bankers Association and America’s Credit Unions.
“We welcome the Office of the Comptroller of the Currency’s interim final actions confirming both preemption of the Illinois Interchange Fee Prohibition Act by federal law and national banks’ federal powers. The OCC’s actions make it clear that states cannot interfere with national bank powers that President Lincoln and Congress placed firmly under federal authority more than 160 years ago and remain essential to the effective functioning of our banking system,” the associations said in a joint statement.
The associations said the actions are consistent with the OCC’s prior amicus filings in this case and with the agency’s public commitment to defend federal preemption.
“They reinforce the firm legal foundation of our ongoing appeal and underscore that Illinois’ misguided law is unlawful and should not be implemented. The OCC’s actions should also send a strong signal to other states to follow the law and not repeat Illinois’ mistake,” the associations stated. “We appreciate the OCC’s clear affirmation that federal law must govern national banking activities. We encourage the NCUA to follow the OCC’s lead and similarly defend federal credit union laws to ensure that IFPA is halted for all financial institutions and that a consistent national framework is preserved going forward.”