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The battle over interchange fees in the United States has moved well beyond a state level policy dispute. By intervening both in court and through the regulatory process, the Office of the Comptroller of the Currency has raised the stakes for issuers, merchants and payment networks alike.
OCC Intervention Pushes the Interchange Battle
What began with Illinois’ attempt to reshape how card fees are calculated now threatens to become a defining contest over whether interchange policy will be set nationally or splinter along state lines.
At the centre of the dispute is Illinois’ Interchange Fee Prohibition Act, which is due to take effect on 1 July. The law would prevent interchange from being charged on the portions of a card transaction linked to taxes and gratuities.
On the surface, that may appear to be a narrow adjustment. In practice, however, it would require merchants, acquirers and processors to isolate these elements within each transaction and pass them through the payments chain separately. That represents a material change to how card payments are currently structured.
Federal Authority Meets State Ambition
The OCC’s intervention is significant because it reframes the issue from one of fee policy to one of banking authority. In its amicus brief filed in the Seventh Circuit, the agency sided with bank plaintiffs and argued that Illinois is intruding on powers granted to national banks under federal law.
In the OCC’s interpretation, interchange is not merely a network pricing mechanism. It forms part of the wider economic model that supports lending, deposit taking and transaction processing.
That argument matters because it broadens the legal question. The issue is no longer confined to whether a state can alter a component of merchant fees. It is whether a state can compel banks and payment systems to redesign the treatment of transactions in ways that affect the exercise of federally authorised banking powers.
Operational and Economic Consequences
The implications for the industry are considerable. If Illinois prevails, issuers and network participants may be forced to introduce state-specific compliance models, altering routing logic, data segmentation and reconciliation processes.
Such fragmentation would undermine the uniformity on which the card system depends. It would also increase costs at a moment when interchange income remains economically significant. According to the St. Louis Fed, US banks collected $66 billion in interchange fees in 2025, up from $64 billion in 2024 and $52 billion in 2021.
A Precedent with National Reach
The Illinois case matters partly because other states are watching. Legislative interest in Colorado and Delaware suggests that similar measures could emerge elsewhere if the law survives appeal.
That would create the prospect of a patchwork regime in which transaction-level fee treatment varies by jurisdiction.
If, by contrast, the appellate court sides with the OCC and the banks, the result would reinforce federal primacy and preserve a consistent national framework for interchange. Either way, the decision will resonate far beyond Illinois.
For the payments industry, this is not simply a legal dispute over swipe fees. It is a test of whether the US card market can remain interoperable under a single model, or whether state activism will begin to redraw its economics one transaction at a time.
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