The legislative front has been active during the first half of this year, particularly concerning the Illinois Interchange Fee Prohibition Act (IFPA). As a staunch advocate of protecting the interests of credit unions and their members, Velera continues to monitor and engage regarding the IFPA — but we cannot do it alone. We ask every credit union and all key system partners to join us in making our collective voice heard.

Background

The IFPA is a first-of-its-kind state law, prohibiting financial institutions from receiving interchange income on the sales tax and gratuity portions of credit and debit card transactions. The state law was temporarily delayed from its original effective date of July 1, 2025, and is currently planned to take effect July 1, 2027.

Here is a timeline of recent responses to the IFPA:

February 11, 2026: A court ruling confirmed that any cardholder transaction occurring in Illinois – regardless of the issuer – would be subject to interchange withheld on the tax and gratuity portion of the payment beginning July 1, 2026.
February 13, 2026: Plaintiffs, including America’s Credit Unions, the Illinois Credit Union League, the American Bankers Association and the Illinois Bankers Association, challenged the law, filing an expedited appeal of that decision.
March 18, 2026: The industry took meaningful steps to engage both legislators and consumers. The Electronic Payments Coalition (EPC) launched a statewide advertising campaign targeted at Illinois legislators, urging repeal of the law, as well as a consumer-facing “Guard Your Card” campaign, bringing this business-to-business fight directly to Illinois cardholders.
April 24, 2026: The Office of the Comptroller of the Currency (OCC) issued an interim final rule and order preempting the IFPA. The actions, effective on June 30, 2026, declare that national banks and federal savings associations are exempt from the IFPA state law.
May 8, 2026: The federal appeals court canceled the appeals hearing scheduled for May 13, 2026, vacating the district court’s February ruling in light of the OCC’s interim final rule.
May 20, 2026: The National Credit Union Association (NCUA) issued a similar rule to that of the OCC.
May 29, 2026: Velera, America’s Credit Unions, the Illinois Credit Union League, Defense Credit Union Council (DCUC), the American Bankers Association and the Illinois Bankers Association and many financial institutions filed comment letters in support of the OCC’s interim final rule, preempting the IFPA.
June 1, 2026: The Illinois General Assembly passed its annual budget during the first week of June, including language that effectively extends the implementation date of the IFPA by one year to July 1, 2027. Illinois Governor J.B. Pritzker is expected to sign the legislation soon.
June 8, 2026: The NCUA published an Interim Final Rule about the IFPA, confirming the IFPA and other similar state laws are preempted by the Federal Credit Union Act. Per the NCUA, its Interim Final Rule is intended to preempt any state law affecting the non-interest charges and fees related to payment card services, as well as to provide additional clarity and ensure consistency with national banks following a similar rule issued by the OCC. The NCUA’s Interim Final Rule takes effect on June 30, 2026.

Impact on Credit Unions

The IFPA and similar state laws create a complex and difficult framework that could expose financial institutions to significant liability if they don’t comply. Imposing different rules across states could create a fragmented payments network, making it less efficient as states consider or enact differing requirements.

Courts reviewing the IFPA have already noted that these requirements could bring high costs and added operational challenges, with severe consequences across the system. The ability to track gratuities and state and local sales taxes – including excise taxes – on Illinois transactions is not readily in place across the industry today, and the compliance burden associated with this law remains significant. The penalty for non-compliance is substantial: $1,000 per transaction to the party that improperly assesses or receives the interchange. To comply in an automated manner, card networks would need to implement new technical specifications at presently unknown costs and timing. New terminals and point-of-sale (POS) software updates may also be required for merchants.

Credit unions, which operate as not-for-profit cooperatives with limited resources, would be hit especially hard. For the nation’s roughly 4,200 credit unions, interchange revenue is essential to providing affordable, secure financial services to their members and communities.

Take Action Now: Submit Comments by June 30

While recent developments have been positive, our work is not done. We anticipate ongoing similar legislation in other states, with New York, Massachusetts and Pennsylvania among those examining interchange-related restrictions, as well as a lengthy appeals process in Illinois. Chief Judge Virginia Kendall of the Northern District of Illinois issued a permanent injunction the first week of June 2026, barring the enforcement of IFPA against national banks, federal savings associations, out-of-state banks and payment networks when they are supporting those institutions; however, all state-chartered credit unions and Illinois state banks remain subject to the law and the status of federal credit unions is uncertain.

It’s time to raise our collective voice on behalf of the credit union industry. In collaboration with our industry partners, we strongly encourage all credit unions to submit comment letters to the NCUA to help strengthen their litigation position, as merchants are expected to challenge both the OCC and NCUA rules.

Velera has also submitted our own comment letter, and we’ve created the following templates for our credit unions to provide supporting comments on the NCUA’s Interim Final Rule:

Comment Letter Template: NCUA Interim Final Rule.

The best time to submit comments is by June 30, 2026. You can submit comments in one of the following ways. Please send comments by one method only.

Federal eRulemaking Portal: Go to this link and follow the instructions to submit your comment. For reference, the docket number for this rule is NCUA-2026-1189.
Federal Register: Follow this link and click the green “SUBMIT A PUBLIC COMMENT” button. A plain language summary of the rule is also available on the docket website.
Mail: Send your comment to Melane Conyers-Ausbrooks, Secretary of the Board, National Credit Union Administration, 1775 Duke Street, Alexandria, VA 22314-3428.*
Hand Delivery/Courier: Same as mailing address.*

*Mailed and hand-delivered comments must be received by the close of the comment period.

Thank you for joining us and using your voice to reinforce our collective support of the NCUA’s ruling.

As the only large fintech provider solely focused on protecting the interests of credit unions and their members, Velera remains fully committed to keeping you informed and supported as this legislation – and similar legislation throughout the country – continues to evolve.

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