(The Center Square) – The Illinois Bankers Association says Illinois U.S. Sen. Dick Durbin, writing a letter to the Office of the Comptroller of the Currency, is “missing the forest for the trees.”

An Illinois law that takes effect in 2025 aims to ban charging interchange fees on taxes and tips, sparking a legal battle with banks. The case of Illinois Bankers Association v. Raoul is currently pending in federal court, with financial institutions filing lawsuits to block implementation of the law.

In a friend-of-the-court brief, Durbin, D-Springfield, urged the OCC to clarify its understanding of the exchange laws. Durbin accused the OCC of making incorrect statements in an amicus brief submitted in the case.

Carolyn Settanni, executive vice president and general counsel of the Illinois Bankers Association, said Durbin filed his own amicus brief and the judge can decide whether the OCC made “incorrect statements.”

“This Illinois law will wreak havoc on Illinois consumers, small businesses and community financial institutions and it will happen in just a few months unless the court intervenes, which we have requested,” Settanni said. They are the mega-retailers and they are trying to increase their bottom line by forcing the entire payments industry to make this huge change in a way that will benefit the mega-retailers but will not benefit the smaller players and certainly not the consumers and Illinois Community Financial Institutions.

Settanni said federal law provides for a national banking system that can operate without state laws that interfere with the powers a national bank has.

“That’s why the Illinois law is preempted by the National Bank Act and it’s a threat that is reflected in all of our briefs, as well as the OCC’s amicus brief. They say this will fragment and disrupt our payment system that was established by the national banks and because of this disruption, Illinois law is preempted by this federal law,” Settanni said.

Settanni said state law throws out the window simple swipe transactions that are safe, secure and efficient and no other jurisdiction in the world seeks to change the current payment system.

Rob Karr, president and CEO of the Illinois Retail Merchants Association, said the Illinois Bankers Association is not arguing that it cannot make changes to comply with the law, but rather that it cannot comply before the deadline, which is July 1. 2025.

“This ignores the fact that, as we have repeatedly pointed out, they (bankers) already do this for business-to-business transactions, they already separate themselves for certain tax-exempt organizations and for certain tax-exempt transactions. ‘tax,’ Karr said. “So it’s not that complicated.”

The Illinois Interchange Fee Prohibition Act prevents payment card networks, acquirers, processors and issuers from charging interchange fees on taxes or tips in electronic transactions. The OCC supports the Illinois Bankers Association’s argument that the IFPA is preempted by the National Bank Act.

“They claim that federal law takes precedence over it (state law), that only the federal government can regulate some of this. No one else seems to believe that’s the case, but that’s what the courts will ultimately decide,” Karr said.

The OCC said in its amicus brief that the state law is “ill-conceived, highly unusual, and largely unworkable.”