On April 3, the Illinois attorney general filed a combined principal and response brief in the U.S. Court of Appeals for the 7th Circuit, urging the court to affirm the district court’s ruling that the Illinois Interchange Fee Prohibition Act’s (IFPA) interchange fee limitation is not preempted by federal law and to reverse the district court’s permanent injunction blocking enforcement of the IFPA’s data usage limitation. The brief responds to the plaintiffs’ appeal and advances the attorney general’s cross-appeal in ongoing litigation (previously covered by InfoBytes here). Subsequently, on April 7, the 7th Circuit scheduled oral argument for May 13.
With respect to the interchange fee limitation, the attorney general argued that the provision does not significantly interfere with national banks’ powers under the National Bank Act because interchange fees are established, charged, and received by payment card networks, not by banks, and that national banks remain free to charge or receive any fees they themselves establish. The brief states that the IFPA does not ban interchange fees altogether but “merely exempts state and local taxes and gratuities from such fees.” The attorney general asserted that the district court correctly applied the preemption standard in line with U.S. Supreme Court precedent, which requires a practical assessment of whether a state law actually or effectively prohibits banks from exercising federally authorized powers. The brief further contends that the Supreme Court’s preemption standard does not extend to federal credit unions, that the plaintiffs’ Dormant Commerce Clause claim was barred by the Eleventh Amendment, and that equitable principles did not justify extending any injunction to payment card networks.
On cross-appeal, the attorney general argued that the district court erred in enjoining the data usage limitation because plaintiffs lacked standing to challenge the provision prior to enforcement, arguing their fear of broad enforcement was grounded in an “unreasonable reading” of the statute. The brief maintains that a reasonable construction of the data usage limitation would not prohibit the fraud detection and rewards-program activities that the plaintiffs claimed were threatened, and that the most plausible reading of the provision prohibits only unauthorized, commercial use of customers’ transaction data, such as selling data to targeted advertisers, which is consistent with the Illinois Banking Act’s existing financial records protections. As previously covered by InfoBytes, on March 2, the court ordered the plaintiffs to file their reply brief and responsive brief by April 17 under an expedited briefing schedule.
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