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Legal and regulatory developments cloud state swipe‑fee reform options
Summary
Witnesses described recent OCC and NCUA actions, ongoing Illinois litigation and a pending federal settlement that could limit or alter state options for regulating interchange and surcharging. The commission heard legal experts explain how preemption and pending court rulings affect policy timelines.
Legal and regulatory experts told commissioners that recent federal actions are reshaping states' ability to act on swipe‑fee reforms. Vance Swanson, who worked on the 2010 federal debit interchange reform law, said a February federal court ruling found Illinois' law not preempted, but that the OCC subsequently issued an interim final rule (April 29) and that the NCUA issued a similar action — both raising preemption questions and prompting ongoing litigation.
Steve Rauschenberger summarized a proposed nationwide settlement in federal litigation: he said the deal would permit merchants to restrict acceptance of some card products, include a 10‑basis‑point across‑the‑board reduction in interchange, impose a temporary cap of 1.25% on standard transactions for five years, and remove network prohibitions on surcharging (leaving state law in place). Witnesses emphasized these are legal developments to monitor rather than state policy actions taken at this hearing.
Commissioners heard that litigation timelines and potential judicial rulings on expansion of injunctions remain uncertain and that these outcomes will influence which state remedies are viable.
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