OCC Enters the Interchange Fight and Raises the Stakes

Why It Matters

The outcome will determine whether interchange fees remain under uniform federal oversight or become subject to a patchwork of state rules, directly affecting banks’ revenue streams and the efficiency of the payments ecosystem.

Key Takeaways

• OCC filed amicus brief supporting banks in Illinois interchange case
• Illinois law would exclude taxes and tips from interchange calculations
• Interchange fees rose to $66 billion in 2025
• State‑by‑state rules could fragment payment‑system uniformity
• OCC submitted rulemaking on non‑interest fees for federal oversight

Pulse Analysis

Interchange fees—often called swipe fees—have become a focal point for regulators seeking to balance consumer protection with the financial system’s stability. While the Federal Reserve and the OCC traditionally oversee national banks, state legislatures like Illinois are pushing back, arguing that merchants should not subsidize banks through fees on taxes and gratuities. The OCC’s amicus brief underscores a broader legal question: can a state dictate the internal pricing mechanisms of federally chartered banks, or does that authority reside exclusively with federal law and network rules? This tension reflects a growing trend of state‑level fintech scrutiny that could reshape the regulatory landscape.

If Illinois’ approach is upheld, merchants would need to redesign point‑of‑sale software to isolate tax and tip amounts, and banks would have to reconfigure transaction routing and reconciliation systems. Such operational overhauls could increase compliance costs for issuers and acquirers, potentially eroding the $66 billion in interchange revenue reported for 2025. Moreover, a fragmented regulatory regime could create pricing inconsistencies across states, undermining the seamless experience consumers expect when swiping cards nationwide. The OCC’s concurrent rulemaking on non‑interest fees signals a preemptive effort to cement federal standards before state statutes gain traction.

Beyond Illinois, lawmakers in Colorado, Delaware and other jurisdictions are watching the case closely, ready to introduce similar provisions. A divergent state framework would challenge the interoperability that payment networks rely on, prompting banks to either adopt multiple fee structures or lobby for a federal preemption. Industry stakeholders therefore have a vested interest in a clear, uniform policy that preserves efficiency while addressing legitimate consumer concerns. The upcoming appellate decision, slated before the July 1 effective date, will likely set a precedent that determines the balance of power between state innovation and federal uniformity in the payments arena.