OCC Enters the Interchange Fight and Raises the Stakes

In March, the OCC filed an amicus brief in the Seventh Circuit appeal of Illinois’ Interchange Fee Prohibition Act, siding with bank plaintiffs and urging the court to reverse key portions of the lower court’s ruling. Last week, it advanced a regulatory track, submitting a rulemaking item on noninterest charges and fees for federal review.  The details of that rule have not yet been published. The Illinois law is slated to take effect July 1.

Federal-State Fault Line

The Illinois statute seeks to prohibit the collection of interchange on portions of transactions tied to taxes and gratuities, which would require merchants and processors to isolate those elements at the transaction level. The OCC’s position frames that requirement as an encroachment on powers granted to national banks under federal law.

Because the OCC supervises national banks, its stance carries direct operational implications for issuers. The agency’s court filing emphasizes that interchange is embedded in the structure that supports lending, deposit services and transaction processing. The issue before the court, therefore, extends beyond fee mechanics and into whether a state can compel changes to how transactions are structured and priced.

What Illinois Is Trying to Change

The Illinois law introduces a targeted adjustment with broader consequences. By excluding taxes and tips from interchange calculations, it alters how total transaction value is defined for fee purposes. That change requires merchants to identify and transmit those components separately, and it obliges payment systems to recognize and process them as distinct elements.

The OCC’s brief states that the Illinois statute represents “an improper and undeniable state interference with federally authorized banking powers.” It further warns that compliance would require significant operational changes across institutions, including modifications to systems that currently treat transactions as unified amounts. Elsewhere, and in terms of the economics, last week the St. Louis Fed estimated that U.S. banks collected $66 billion in interchange, or so-called “swipe,” fees in 2025.  That latest tally indicates a boost from $64 billion in 2024 and the $52 billion recorded in 2021.

The OCC argues that focusing on which party formally sets interchange overlooks the broader relationship between issuing banks and payment networks. In its view, reliance on third-party networks does not diminish the federal authority that underpins the provision of card services.

“The power to charge and receive a fee, not just determine its amount, are express powers of national banks that IFPA seeks to improperly confine,” the brief asserts.

National or State-by-State Rules

The case carries implications that extend beyond Illinois. Legislative proposals in other states such as Colorado and Delaware indicate that similar approaches to interchange could follow, raising the prospect of divergent rules across jurisdictions.

If the Illinois framework is upheld, financial institutions would need to adapt their systems to accommodate state specific fee calculations. That would involve changes to transaction routing, data segmentation and reconciliation processes, all of which currently rely on uniform treatment across markets.

A different outcome would find interchange governed under federal standards and network rules. In that environment, institutions would continue to process transactions with consistent fee structures regardless of location, maintaining interoperability across the payments system. The OCC’s filings contend that such uniformity supports efficiency and stability in the delivery of banking services.

The timeline remains compressed. The appellate court is expected to take up the case before the law’s scheduled effective July 1, creating a near term decision point for the industry.