SUPPLEMENTARY INFORMATION:

I. Introduction

In the National Bank Act (NBA), Congress granted national banks enumerated powers, including to “loan[ ] money on personal security” and to “receiv[e] deposits,” as well as “all such incidental powers as shall be necessary to carry on the business of banking.” ^[1] As the OCC and courts have long recognized, national banks thus have broad powers to engage in activities that are part of, or incidental to, the business of banking, including issuing debit cards and credit cards (payment cards) and processing payments.^[2]

National banks also have the authority to receive compensation for the products and services they provide, including to charge and receive interchange fees ^[3] for processing payment card transactions.^[4] Specifically, 12 CFR 7.4002, which implements the NBA, sets out national banks' broad authority to impose non-interest charges and fees and provides each national bank with the discretion to make business decisions about how to impose these charges and fees.^[5]

Recently, a Federal district court in the Northern District of Illinois created ambiguity about the scope of § 7.4002, asserting that national banks do not “set” interchange fees and finding that “[t]he thrust of 12 CFR 7.4002 is not to protect fees centrally established by a third-party company.” ^[6] Such a finding is, however, inapposite to the OCC and courts' longstanding interpretation of § 7.4002 and fails to recognize the reality of the payment card systems and the modern economy. The OCC is issuing this interim final rule to clarify the scope of this national bank power.

National banks routinely rely on third parties for a range of products and services.^[7] In particular, third parties are crucial to national banks' provision of payment cards, which are vital and deeply rooted components of the American and global economy. These cards are among the most universally accepted and common methods of payment and are routinely used by millions of consumers to pay for products and services worldwide.^[8]

National banks serve essential roles within card networks, which are a crucial means of exercising their statutory deposit-taking and lending powers. National banks contract with card networks ( e.g., Visa and Mastercard) and others to facilitate payment card transactions. As the issuers of credit and debit cards, they provide payment cards to customers, assess cardholder risk, and offer services including fraud detection and prevention, dispute resolution, and rewards programs. As acquirers, they contract with merchants who accept payment cards and connect these merchants to the card network so that transactions are seamlessly processed and settled.

As compensation, national banks are paid fees for their payment card services. These fees, which include interchange fees, compensate these institutions for the costs of their participation, incentivize their provision of services and continued participation in the network, and enable enhancements, such as fraud detection and prevention, rewards programs, and technology upgrades. ( printed page 22991)

National banks could engage in bilateral negotiations with myriad merchants and other banks involved in processing payment card transactions to establish the terms of this activity, including fees.^[9] Given the global nature of payment card systems, however, such a process would be complex, inefficient, ineffective, and costly. Moreover, most national banks do not have the resources to engage in such activities. Accordingly, most national banks agree to the interchange fees set by the card networks. The NBA clearly permits national banks to make this decision, along with decisions about the payment card services to offer, the card networks with which to contract, and the terms of the agreements. Therefore, the applicability of § 7.4002 should not be read to change simply because a third party has a role in setting the non-interest charges and fees.

II. Description of the Proposed Rule

Although the OCC believes that § 7.4002 already allows national banks to impose fees that are set by a third party, the OCC is revising § 7.4002 to make that explicit and resolve any uncertainty about the scope of the regulation. The OCC is also revising § 7.4002 to specifically include interchange fees as a type of non-interest charge or fee national banks may impose.

Defining “Charge”

Some of the confusion about the scope of § 7.4002 appears to be related to the lack of clarity about what it means for a national bank to “ charge . . . non-interest charges and fees.” Accordingly, the OCC is adding a definition of “charge” to paragraph (a) of § 7.4002 and moving the authority to impose non-interest charges and fees to paragraph (b) of the section. This definition clarifies that charge means to assess, collect, impose, levy, receive, reserve, take, or otherwise obtain, including through a fee sharing or similar economic relationship. This definition also clarifies that national banks may take such actions directly or through intermediaries, partners, payment networks, interchanges, or other third parties. These amendments are intended to encompass various means by which a national bank may obtain non-interest compensation for providing a product or service, regardless of which entity sets the amount of the non-interest charge or fee or exactly how the national bank obtains the charge or fee.^[10]

Removing “Customer”

The OCC is also amending the authority to impose non-interest charges and fees, now redesignated as paragraph (b) of § 7.4002, to remove the word “customer.” As reflected in the new definition of “charge,” the purpose of revised § 7.4002 is to clearly articulate national banks' power to receive non-interest compensation for providing products or services, regardless of whether that compensation comes directly from the individual or entity receiving the product or service or via a third party that may not have a “customer” relationship with the bank.

Adding Interchanges Fees as an Example

Current § 7.4002 contains only one example of the types of non-interest charges and fees national banks can impose—deposit account service charges. Although previous iterations of § 7.4002 contained additional examples of non-interest charges and fees, the OCC generally removed the examples in 2001, noting that “explicit reference to the . . . types of fees is unnecessary and could be misinterpreted as a limitation on a national bank's ability to charge other types of fees.” ^[11] Given recent confusion, however, the OCC is adding interchange fees as another nonexclusive example of the charges and fees covered by § 7.4002 to provide additional clarity. The agency continues to emphasize, however, that the inclusion of this example does not imply the exclusion of other non-interest charges and fees.^[12]

The Role of Third Parties in Setting Non-Interest Charges and Fees

The OCC is also amending several parts of newly redesignated paragraph (c)(2) of § 7.4002 to explicitly include scenarios where non-interest charges or fees may be set by, or in conjunction with, third parties. The existing paragraph (b)(2) provides that the establishment of non-interest charges and fees, their amounts, and the method of calculating them are business decisions to be made by each national bank, in its discretion, according to sound banking judgment and safe and sound banking principles. This paragraph also describes the factors a national bank considers when making the business decision to establish non-interest charges and fees in accordance with safe and sound banking principles. This interim final rule amends this paragraph to make explicit that a national bank's choices regarding charging non-interest charges and fees, including whether to enter into business relationships or lines of business or charge fees set by or in consultation with third parties, are also business decisions to be made by each bank, in its discretion according to sound banking judgment and safe and sound banking principles. These amendments also clarify that the factors a national bank considers include the use of third parties to provide or facilitate the provision of a product or service. The amendments reflect the reality of the modern financial system and global economy, where products and services may be more efficiently and effectively provided through the use of third parties, which may also make or influence decisions regarding pricing.

The OCC is also making conforming edits to paragraph (c)(1) of § 7.4002 to clarify that it applies to the business decisions a national bank makes regarding non-interest charges and fees. Consistent with this provision and applicable antitrust law, national banks are prohibited from engaging in illegal anticompetitive conduct in making business decisions regarding non-interest charges and fees.^[13]

III. Regulatory Analysis

A. Administrative Procedure Act

The OCC is issuing this interim final rule without prior notice and the opportunity for public comment that are ordinarily prescribed by the ( printed page 22992) Administrative Procedure Act (APA).^[14] Pursuant to 5 U.S.C. 553(b)(B), general notice and the opportunity for public comment are not required with respect to a rulemaking when an “agency for good cause finds (and incorporates the finding and a brief statement of reasons therefor in the rules issued) that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.”

The OCC has found that prior notice and public comment are impracticable for this interim final rule due to the regulatory confusion created by the February 2026, Raoul SJ opinion, which found that Federal law does not preempt a key provision of the Illinois Interchange Fee Prohibition Act (IFPA),^[15] and the potential consequences of such confusion. In the Raoul SJ opinion, the district court removed its December 2024 preliminary injunction of the IFPA as applied to national banks and other depository institutions.^[16] The court's analysis in the Raoul SJ opinion was based, in part, on a misunderstanding of the NBA and § 7.4002. As a result, absent this interim final rule, there likely will be significant uncertainty as to whether national banks are required to comply with the IFPA by July 1, 2026.

As explained below, the IFPA creates a complex and potentially unworkable standard, and it imposes significant potential liability for non-compliance. Therefore, national banks may take drastic actions to avoid these risks, up to and including declining payment card transactions subject to the IFPA.^[17] Given the complexity of the payment card systems and the modern economy, these effects may not be limited to Illinois.

For national banks that choose to continue to support these payment card transactions, the OCC understands that these banks will need to inform customers, in advance of the IFPA's July 1, 2026 effective date, that the terms and conditions of their payment cards may soon change.^[18] The OCC also understands that national banks will need to inform merchants about possible changes, including updates to how they process payments, the need for new software or hardware, or that some transactions may be declined.^[19] These communications, as well as the potential for national banks to stop supporting covered payment card transactions, may generate significant customer and merchant confusion about whether, or how, payment cards will work after the IFPA's effective date. These potential actions may cause doubt about continued access to basic lending and deposit services, which could lead to economic harm and disruption and pose significant risks to the safety and soundness of national banks and the national banking system as a whole.

In light of these potential consequences, the OCC, for good cause, finds that advance notice and comment is impracticable and is issuing this interim final rule. This rule will provide certainty that the IFPA is preempted with respect to national banks before it goes into effect and therefore help prevent the imminent negative effects of the IFPA's application to national banks. Given the importance of this issue, however, the OCC invites public comment on all aspects of this interim final rule and intends to issue a final rule as soon as possible after the close of the comment period and sufficient time to consider and address comments.

Background

In the modern economy, millions of customers and merchants worldwide rely on payment cards every day, including an estimated 1.3 million merchants in Illinois.^[20] As discussed above, national banks serve an essential function in the U.S. payment card systems.^[21] A significant disruption of these payment networks could cause substantial economic harm.

On June 7, 2024, Illinois enacted the IFPA, which, among other things, prohibits card issuer banks, card networks, acquirer banks, and other participants from receiving or charging a merchant an interchange fee on the tax or gratuity amount of a payment card transaction.^[22] This prohibition, known as the interchange fee prohibition, applies if the merchant informs the acquirer of the tax or gratuity amount as part of the authorization or settlement of the transaction (automatic process).^[23] Alternatively, the merchant has 180 days to transmit the relevant documentation ( e.g., paper receipts) to the acquirer bank, after which the issuer has 30 days to credit the merchant for any interchange fee charged on the tax or gratuity amount (manual process).^[24] Violations of the interchange fee prohibition carry a civil penalty of $1,000 per transaction.^[25] The IFPA goes into effect on July 1, 2026.

In August 2024, the Illinois Credit Union League, Illinois Bankers Association, America's Credit Unions, and American Bankers Association (collectively, IBA) sought to enjoin the IFPA.^[26] On December 20, 2024, the district court for the Northern District of Illinois granted a preliminary injunction as applied to national banks.^[27] In February 2026, however, approximately four months before the IFPA's effective date, the district court reversed course. It found that the interchange fee prohibition was not preempted by federal law, reasoning that “[t]he thrust of 12 CFR 7.4002 is not to protect fees centrally established by a third-party company.” ^[28]

IFPA's Application to National Banks

The OCC understands that current payment card infrastructure does not support the IFPA's automatic process and cannot be updated by the IFPA's effective date.^[29] To implement this process would appear to require, at a minimum: (1) the card networks to develop new technological and standards changes in coordination with relevant U.S. and international standards bodies; (2) acquirer and issuer banks to implement these changes; and ( printed page 22993) (3) merchants to develop and adopt systems to transmit the requisite information at the point of sale.^[30] Such changes likely would entail lengthy and careful planning because implementation glitches or failures could disrupt global payment card systems or create opportunities for fraud or misuse.^[31]

As an alternative, certain merchants may invoke IFPA's manual process by submitting tax documentation. It is unclear, however, how this process could be implemented. Acquirer national banks may not be able to identify the issuer national bank in a given transaction.^[32] Even if identification were possible, there is generally no mechanism for direct communication between these banks.^[33] Furthermore, based on the broad definition of tax documentation, which includes “invoices, receipts, journals, ledgers, and tax returns,” an issuer bank may not be able to reliably identify the tax and gratuity amount for each transaction or calculate the corresponding interchange fee credit.^[34] Even if each of these hurdles could be overcome, building new systems and hiring staff to facilitate this highly manual process would require time to develop and test.^[35]

Despite the complex and potentially unworkable nature of the interchange fee prohibition, the IFPA exposes national banks to penalties of $1,000 per transaction for failing to comply with its provisions.^[36] Given the upwards of 6.5 billion payment card transactions that occur yearly in Illinois, participants in the payment card systems could be subject to as much as $6.5 trillion in liability per year for non-compliance with IFPA.^[37] The potential liability could pose significant risk to a national bank's safety and soundness as well as the national banking system.

In light of the above, the card networks and banks may seek to mitigate their liability, for example, by advising merchants in Illinois not to accept payment cards for tax and gratuity, attempting to decline certain classes of transactions ( e.g., purchases of gasoline, where excise tax is imbedded in the product's price),^[38] or denying payment card transactions originating in Illinois or elsewhere.^[39] Some smaller banks may even be forced to stop offering payment cards altogether.^[40] Some have stated that compliance with the IFPA could lead to “potentially business-ending consequences” for some participants.^[41]

The OCC understands that banks will need to communicate with customers and other stakeholders about the effects of the IFPA, including potential changes to the functionality of payment cards.^[42] As noted above, these communications may generate significant confusion and doubt about access to basic lending and deposit services, especially when combined with potential widespread and unpredictable declinations of payment card transactions. This could lead to economic harm and disruption and pose significant risks to the safety and soundness of national banks and the national banking system as a whole.

To avoid these potentially grave consequences, the OCC is acting by interim final rule.

B. Paperwork Reduction Act

Under the Paperwork Reduction Act of 1995 (PRA),^[43] the OCC may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The OCC has reviewed this interim final rule and determined that it does not create any new or revise any existing collections of information. Accordingly, no PRA submissions to OMB will be made with respect to this interim final rule.

C. Regulatory Flexibility Act

The Regulatory Flexibility Act (RFA) ^[44] requires an agency to consider whether the rules it proposes will have a significant economic impact on a substantial number of small entities.^[45] The RFA applies only to rules for which an agency publishes a general notice of proposed rulemaking pursuant to 5 U.S.C. 553(b). As discussed above, consistent with § 553(b)(B) of the APA, the OCC has determined for good cause that general notice and opportunity for public comment is impracticable and therefore is not issuing a notice of proposed rulemaking. Accordingly, the RFA's requirements relating to initial and final regulatory flexibility analysis do not apply to this interim final rule.

However, the OCC evaluated whether the interim final rule will have a significant economic impact on a substantial number of small entities. The OCC currently supervises approximately 609 small entities, of ( printed page 22994) which 420 are national banks that will be impacted by the interim final rule.

In general, the OCC classifies the economic impact on an individual small entity as significant if the total estimated impact in one year is greater than 5 percent of the small entity's total annual salaries and benefits or greater than 2.5 percent of the small entity's total non-interest expense. Furthermore, the OCC considers 5 percent or more of OCC-supervised small entities to be a substantial number. Thus, at present, 30 OCC-supervised small entities would constitute a substantial number. Therefore, since the interim final rule will affect all 420 OCC-supervised national banks, a substantial number of OCC-supervised small entities would be impacted.

However, the interim final rule imposes no new mandates, and thus no direct costs, on affected OCC-supervised institutions. Therefore, the OCC believes that the interim final rule will not have a significant economic impact on a substantial number of small entities.

D. Unfunded Mandates Reform Act of 1995

As a general matter, the Unfunded Mandates Reform Act of 1995 (UMRA) requires the preparation of a budgetary impact statement before promulgating a rule that includes a Federal mandate that may result in the expenditure by State, local, and tribal governments, in the aggregate, or by the private sector, of $100 million or more in any one year ($193 million as adjusted annually for inflation).^[46] However, the UMRA does not apply to final rules for which a general notice of proposed rulemaking was not published. As discussed above, consistent with § 553(b)(B) of the APA, the OCC has determined for good cause that general notice and opportunity for public comment is impracticable and therefore is not issuing a notice of proposed rulemaking. Moreover, the OCC has analyzed the interim final rule under the factors in UMRA. Because this interim final rule imposes no new mandates, it will not require additional expenditure of $193 million or more annually by any State, local, or tribal governments, in the aggregate, or by the private sector. Accordingly, for these reasons, the OCC has not prepared the written statement described in § 202 of UMRA.

E. Riegle Community Development and Regulatory Improvement Act of 1994

Pursuant to § 302(a) of the Riegle Community Development and Regulatory Improvement Act (RCDRIA) of 1994,^[47] in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions, the OCC must consider, consistent with principles of safety and soundness and the public interest, (1) any administrative burdens that the final rule would place on depository institutions, including small depository institutions and customers of depository institutions and (2) the benefits of the final rule. This rulemaking does not impose any reporting, disclosure, or other requirements on insured depository institutions. Therefore, § 302(a) does not apply to this interim final rule.

F. Executive Orders 12866 and 14192

Executive Order 12866 provides that the Office of Information and Regulatory Affairs (OIRA) within OMB will review all “significant regulatory actions” as defined therein. OIRA has determined that this interim final rule is an economically significant regulatory action under section 3(f)(1) of Executive Order 12866.

As discussed above and in the Supplementary Information section of the OCC's concurrent interim final order finding that Federal law preempts the IFPA (Preemption Order), the IFPA would impose substantial costs on banks. This interim final rule clarifies the scope of national banks' power to charge non-interest charges and fees. As explained in the Preemption Order, the IFPA prevents or significantly interferes with this power and is preempted with respect to national banks. Therefore, this interim final rule, the effect of which is made clear by the Preemption Order, will result in significant cost savings.

Executive Order 14192, titled “Unleashing Prosperity Through Deregulation,” separately requires that an agency, unless prohibited by law, identify at least 10 existing regulations to be repealed when the agency publicly proposes for notice and comment or otherwise promulgates a new regulation with total costs greater than zero. Executive Order 14192 further requires that new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least ten prior regulations. The OCC has determined that the interim final rule will be a deregulatory action under Executive Order 14192 because it may provide legal clarity for affected OCC-supervised institutions.

G. Congressional Review Act

Before a rule can take effect, Subtitle E of the Small Business Regulatory Enforcement Fairness Act of 1996 (also known as the Congressional Review Act or CRA) ^[48] provides that the OCC must submit to Congress and to the Comptroller General the rule along with a report indicating whether it is a “major rule.” In general, if a rule is a “major rule,” the CRA provides that the rule may not takes effect until 60 days after Congress receives the required report or publication of the rule in the Federal Register .^[49] The CRA defines a “major rule” as any rule that the Administrator of OIRA finds has resulted in or is likely to result in (1) an annual effect on the economy of $100,000,000; (2) a major increase in costs or prices for consumers, individual industries, Federal, State, or local government agencies or geographic regions, or (3) a significant adverse effect on competition, employment, investment, productivity, innovation, or the ability of United States-based enterprises to compete with foreign-based enterprises in domestic and export markets.^[50] OIRA has determined that this interim final rule is a major rule.

The effective date of this interim final rule is June 30, 2026. As required by the Congressional Review Act, the OCC will submit the interim final rule and other appropriate reports to Congress and the Government Accountability Office for review.

H. Providing Accountability Through Transparency Act of 2023

The Providing Accountability Through Transparency Act of 2023 ^[51] requires that a notice of proposed rulemaking include the internet address of a summary of not more than 100 words in length of a proposed rule, in plain language, that shall be posted on the internet website www.regulations.gov. While the OCC is not issuing a notice of proposed rulemaking, a summary of this interim final rule can be found below and at https://occ.gov/​topics/​laws-and-regulations/​occ-regulations/​proposed-issuances/​index-proposed-issuances.html.

The OCC is adopting an interim final rule to clarify that national banks' power to charge non-interest charges and fees includes the power to assess, collect, impose, levy, receive, reserve, take, or otherwise obtain non-interest ( printed page 22995) charges and fees, including interchange fees from credit and debit card operations. Further, the interim final rule explains that national banks may charge non-interest charges or fees, even when such charges and fees are set by or in consultation with third parties. The OCC invites public comments on this interim final rule.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

For the reasons set out in the preamble, the OCC amends part 12 of chapter I of title 12 of the Code of Federal Regulations as follows:

1. The authority citation for part 7 continues to read as follows:

Authority: 12 U.S.C. 1 et seq., 25b, 29, 71, 71a, 92, 92a, 93, 93a, 95(b)(1), 371, 371d, 481, 484, 1462a, 1463, 1464, 1465, 1818, 1828, 3102(b), and 5412(b)(2)(B).

2. Revise and republish § 7.4002 to read as follows:

91 FR 22989