Page 6 - January 16, 2025 Bulletin

aRTiCLeS

resources, investment and innovation it takes to make this system spared the chaos this law threatens to inflict on our modern
secure, ubiquitous and seamless for the parties involved in the payments system until the case can be heard, and that the
transaction — consumers, merchants and banks.” court recognizes our ‘demonstrated likelihood of success’ on
the merits of our National Bank Act claims,” the plaintiffs said.
The associations also shared several points they would have raised
had they been invited to testify, including that the credit card “We look forward to answering the judge’s questions to ensure
market is competitive, research shows merchants pocketed the that this relief applies to all financial institutions involved in the
savings after the creation of the debit card fee cap by the Durbin Illinois payment system, so the customers they serve will also be
Amendment, interchange regulation has failed in other countries, protected from the harm IFPA will cause if it is allowed to move
and that payment cards do not contribute to inflation. “The lack forward.”
of credit card issuer representation at the hearing was extremely
disappointing and shows that the committee is not serious about Treasury Department Releases
working to improve the credit card market,” they said. Recommendations for Financial
Read more: https://www.aba.com/advocacy/policy-analysis/senate- Sector AI Strategy
judiciary-interchange-hearing-nov-19
The Treasury Department has released a report with
Court Issues Partial Injunction recommendations on potential next steps for regulators and the
private sector on the use of artificial intelligence in financial services.
Against Illinois Law Restricting Earlier this year, the Treasury Department sought public comments
Interchange Fees on the uses, opportunities and risks of AI in the financial sector.

Many respondents said that emerging AI technologies such as
A federal judge has ordered a preliminary injunction against
enforcement of an Illinois state law restricting interchange fees generative AI are driving expanded use cases but also introducing
for national banks and federal savings associations but left the new risks, leading firms to be cautious about deploying them
law in effect for Illinois-chartered institutions and credit card broadly in customer-facing applications, according to the report.
networks for now. The order also leaves the law in effect for out- Respondents also highlighted differences in supervision for banks
of-state banks and federal credit unions until the court can review and nonbanks developing and deploying AI, as well as the resource
the legal arguments in more detail. gap and dependency on third-party providers for smaller financial
firms.
The Illinois Interchange Fee Prohibition Act bans banks,
payment networks and other entities from charging or receiving According to the report, respondents expressed support for
interchange fees in Illinois on the portion of a debit or credit government actions such as providing additional clarification on data
card transaction attributable to tax or gratuity. In August, the privacy standards, expanding consumer protections and pursuing
American Bankers Association, Illinois Bankers Association and private-public partnerships to share information and best practices.
other groups challenged the law in U.S. District Court for the The Treasury Department itself made several recommendations. One
Northern District of Illinois, arguing it violates multiple federal was to continue international and domestic collaboration among
statutes, including the National Bank Act and the Federal Credit governments, regulators and the financial services sectors to promote
Union Act. The OCC filed a rare amicus brief in October in “consistent and robust” standards for AI use.
support of the associations’ position. Other Treasury Department recommendations included further

In her order, Judge Virginia Kendall agreed the federal law analysis and stakeholder engagement to explore solutions for any
preempted state law when it came to national banks and federal identified gaps in the existing regulatory frameworks; continued
savings associations. However, Kendall reserved judgement on coordination among financial regulators to identify potential
the question of federal preemption for out-of-state-chartered enhancements to existing risk management frameworks; information
institutions and other institutions pending a supplemental sharing between the financial services sector and government
briefing on the matter from the plaintiffs. The judge ordered a agencies to develop data standards, share risk management best
briefing of no more than 10 pages on the subject to be delivered practices and enhance understanding of emerging AI technologies.
by Jan. 15, with the state having until Jan. 22 to submit a It also recommended financial firms prioritize their review of AI-
response of equal length. use cases for compliance with existing laws and regulations before
deployment “and that they periodically reevaluate compliance as
In a joint statement, the plaintiffs said they welcomed the court’s needed.”
ruling to pause implementation of the law for national banks and
federal savings associations. Read more: https://home.treasury.gov/system/files/136/Artificial-
Intelligence-in-Financial-Services.pdf
“The injunction means that many Illinois consumers will be

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