NCUA preempts state fee laws for federal credit unions, with Illinois in its sights
An NCUA interim final rule, effective 30 June 2026, says federal credit unions may set non-interest charges and fees, including interchange, under federal law. It is aimed squarely at the Illinois Interchange Fee Prohibition Act.
Illinois passed the Interchange Fee Prohibition Act in 2024. It restricts interchange fees on the part of a card transaction that is state and local tax or a tip, and the NCUA says it exposes federal credit unions to penalties of "$1,000 per transaction." On 9 June 2026 the NCUA published an interim final rule meant to take federal credit unions out of it (91 FR 34725).
The rule took effect on 30 June 2026. The NCUA didn't propose it first; it asked for comments afterwards, which were due by 9 July 2026.
Why the NCUA moved without notice and comment
The background is a run of litigation. According to the NCUA, a federal district court in the Northern District of Illinois held in February 2026 "that NCUA rules do not preempt the IFPA." National banks went a different way: after the OCC issued its own interim final rule, the same court on 1 June 2026 granted a permanent injunction barring Illinois from enforcing the interchange limit against national banks and some other institutions.
That left federal credit unions as the odd ones out, with the law due to take effect on 1 July 2026. The NCUA cited "the abbreviated timeline between the February 2026 district court case and the effective date of the IFPA" as its good cause for skipping the usual process, and said it "must act immediately to restore parity between FCUs and national banks." A footnote adds that the Illinois legislature voted to push the effective date back from 1 July 2026 to 1 July 2027. At the time the NCUA wrote the rule, the delay had not been signed into law, and the NCUA said it believes good cause exists even if the delay takes effect.
What the rule says
The rule adds a new 12 CFR 701.5, "Preemption," and moves the existing share account preemption language there from 701.35.
The core sentence is in 701.5(c)(2): "An FCU may charge non-interest charges and fees, including share account service charges," along with interchange fees from credit and debit card operations. "Charge" is defined broadly, to include getting fees directly or indirectly through intermediaries, partners, payment networks or interchanges, and through fee-sharing arrangements.
How a federal credit union sets those fees is its own call. Under 701.5(c)(3), fee decisions "are business decisions to be made by each Federal credit union, in its discretion," made on a competitive basis rather than by agreement with other institutions, and consistent with safe and sound practice. The rule lists factors a credit union can consider: the cost of the service, deterring member misuse, its competitive position, use of third parties, and its own safety and soundness.
The rule also lists state laws it doesn't mean to preempt, under 701.5(b)(2) and (b)(3). These include insurance laws, real property security laws, collection costs and attorneys' fees, plain-language requirements, default and cure rules, and areas mainly governed by other federal law such as credit cost disclosure.
Who it reaches
Federal credit unions only. The rule doesn't say it applies to federally insured state-chartered credit unions, so a state charter shouldn't assume it's covered.
What it could mean
For a federal credit union with Illinois cardholders, or cardholders who travel there, this is a relief. The IFPA asked issuers to strip interchange on the tax and tip slice of a transaction, something the NCUA says current card infrastructure doesn't support. The alternative responses the notice describes, up to declining affected transactions, would have been bad for members.
The rule is interim, though, and a federal court has already ruled against the NCUA's preemption once. We'd expect a challenge, and we wouldn't treat the question as settled until the litigation plays out. If you're a federal credit union, keep tabs on the Illinois cases through your league or your card processor, and keep whatever contingency planning you'd started.
State-chartered credit unions in Illinois are in a harder spot. This rule doesn't help them. If the delay to 2027 does take effect, it buys time, but the parity problem the NCUA describes would then run between national banks and federal credit unions on one side and state charters on the other.
Beyond Illinois, the broader fee language matters. Once a federal credit union "may charge non-interest charges and fees" under federal law, other state fee statutes may be tested against it too. We'd read 701.5 closely before relying on it for anything other than interchange, because the carve-outs are long.