Page 13 - August 22, 2024 Bulletin
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Rob Nichols
President and CEO
American Bankers Association
nichols@aba.com
Washington Update
Defend the Dual Banking System
Since the time of President Lincoln, American consumers for debit card transactions and does not carve out taxes
have benefited from a dual banking system, made up of and gratuities.
both state-chartered institutions and federally chartered This law, a gift to corporate mega-retailers as part of a
national banks. last-minute budget deal, is the first of its kind to pass in
This system—which can trace its roots back to the U.S. the nation. We can’t let it stand and run the risk other
Constitution—allows consumers to have more choices. states follow, which is why ABA is fighting back.
It offers them a robust marketplace of banks of different Together with the Illinois Bankers Association, America’s
sizes and business models to meet their needs. And it Credit Unions and the Illinois Credit Union League, we
enables the nation’s more than 750 national banks to filed a lawsuit challenging the law, and we are seeking
operate safely, soundly and efficiently across multiple a preliminary injunction pausing implementation until
jurisdictions under the supervision of the OCC, while the court can rule on the merits of our case. With top
at the same time allowing state banks to serve their outside lawyers assisting us, we have confidence we will
communities with local supervision. prevail in this case, sending a strong message to other
But this system, which has served our country well states looking to follow Illinois’ lead.
for more than 150 years, is now coming under threat, We’ve seen a different kind of challenge to the dual
as lawmakers in both red states and blue states have banking system in other states. Florida and Tennessee
begun to pass laws that will interfere with national have put in place their own safety and soundness tests,
bank operations, violate federal preemption and tread encroaching on the OCC’s federal overnight of national
squarely on the OCC’s turf. banks.
Just look at the situation currently unfolding in Illinois, Like ABA, the OCC has taken notice.
with the Interchange Fee Prohibition Act that was signed
into law this summer as part of the state’s budget We’ve been encouraged by comments from Acting
legislation. This misguided law bans banks, credit unions, Comptroller Michael Hsu noting that his agency will
payments networks and other entities from charging or continue to defend the dual banking system. The
receiving interchange fees in Illinois on taxes and tips acting comptroller pointed out in recent remarks that
charged as part of a credit or debit card transaction. “increasingly, banks are being asked by states to pick
a side in service of performative politics rather than
This law—which will create unprecedented chaos and deliberative policy.” This simply shouldn’t be the case,
confusion for consumers and businesses if allowed to and we will continue to urge the OCC to exercise its
take effect—violates multiple federal statutes, including authority when states cross the line.
the National Bank Act and the Federal Credit Union Act,
and cannot be enforced against national banks, federal Our dual banking system has served Americans well for
savings institutions or state-chartered banks, as well as decades. ABA will continue to push back against efforts
federally and state-chartered credit unions. It also runs to undermine that system, and we’ll keep pressure on
afoul of the Electronic Fund Transfer Act, which directly regulators to do the same.
addresses the permissible amount of interchange fees
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