NACS Joins Merchant Groups’ Suit Challenging ‘Collusive’ Card Fees
The filing challenges actions that try to block an Illinois law banning credit and debit card swipe fees on sales tax and tips from taking effect.
Nov 13, 2026 | 5 min read
Yesterday, NACS joined a group of merchant trade associations in filing a pair of lawsuits challenging actions taken by the Office of the Comptroller of the Currency (OCC) and the National Credit Union Administration (NCUA) earlier this year that try to block an Illinois law banning credit and debit card swipe fees on sales tax and tips from taking effect.
“These lawsuits show that the OCC and NCUA ignored the law and didn’t have the authority to do what they did,” said Doug Kantor, senior vice president of government relations and general counsel at the NACS. “The OCC and NCUA’s rushed rewrites of federal regulations are not legitimate. The court should agree and help protect consumers and small businesses from the huge fees that the credit card industry is extracting from them every day.”
“The interim rule purports to determine that the National Bank Act (NBA) protects national banks’ ability to receive interchange fees established by payment card networks, even when those fees are set centrally and non-competitively by the networks rather than by the banks themselves, are charged to merchants and not bank customers, and are much higher than the amount necessary to compensate banks for their highly profitable credit card practices,” the lawsuit against the OCC said. “But nothing in the National Bank Act — or in the OCC’s poorly reasoned, slapdash rule — authorizes such collusive and excessive fees on merchants that have no banking relationship with the financial institution charging those fees.”
The suit said interchange “swipe” fees set by card networks to process transactions, which total nearly $200 billion a year nationwide and are 10 times rates charged in Europe, are “ultimately reflected in the prices consumers pay,” leaving consumers “stuck with the bill for interchange fees while the issuing banks receive immense profits.” The Illinois law, which was set to take effect July 1 but was delayed a year after legal challenges, would save Illinois merchants and their customers more than $500 million per year.
Swipe fees on sales tax and tips “are particularly unfair” because merchants don’t get to keep those funds, the suit said. And the delay means merchants and consumers “will be charged hundreds of millions of dollars more” in swipe fees in the meantime.
The OCC lawsuit and a similar suit against the NCUA were filed in U.S. District Court in Washington, D.C., by the NACS; the National Retail Federation (NRF); the Retail Industry Leaders Association’s Retail Litigation Center; FMI — the Food Industry Association; the National Restaurant Association’s Restaurant Law Center; the National Grocers Association; the Illinois Retail Merchants Association; the Illinois Fuel and Retail Association; and the Illinois Restaurant Association.
The lawsuits are the latest litigation over Illinois’ Interchange Fee Prohibition Act, which was passed in 2024. This February, U.S. District Judge Virginia Kendall rejected banks’ arguments that the law was preempted by the National Bank Act, saying swipe fees are set by card networks like Visa and Mastercard, and that they are not subject to banking laws because card networks are not banks. Banks appealed that ruling, but while the case was on appeal, the OCC issued a rule in April attempting to say that the NBA preempts state laws from applying to nationally chartered banks even when the banks collude by charging fees set by a third party.
The 7th U.S. Circuit Court of Appeals then sent the case back to Kendall, and in June she ruled against the Illinois law, citing the OCC rule. The NCUA issued a similar rule in June to try to make the Federal Credit Union Act preempt the Illinois law and similar laws from applying to federal credit unions. In September, Kendall expanded her injunction against the law to include those institutions. Last month, Illinois Attorney General Kwame Raoul announced that he would appeal both rulings.
The merchant groups’ first lawsuit said the OCC rule “is based on a flawed legal interpretation of OCC powers, of national bank powers, and of preemption under the National Bank Act.” The Illinois law applies only to swipe fees set by card networks rather than by banks and “targets the business of card networks rather than the business of banking.”
By issuing the rule and order in “interim final” form rather than as a “proposed” rule and doing so “without notice” just weeks before it was to take effect rather than the typical practice of providing months for response from affected groups, the OCC “unjustifiably” violated Administrative Procedure Act requirements for “notice and comment” before making a rule final, the suit said.
The suit said the OCC “has a history of favoring financial interests by purporting to preempt state attempts to protect their constituents” and cited a number of cases in which courts have overturned its preemption moves, including one that said “questions have repeatedly been raised about OCC’s independence from the banks it oversees.”
The second lawsuit made similar points about the NCUA rule, calling it, too, “poorly reasoned” and “slapdash.” It said “nothing” in the Federal Credit Union Act preempts the Illinois law and that the agency similarly exceeded its authority and violated the APA’s requirements for notice and comment.
