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Plaintiff's Combined Reply in Support of Motion for a Preliminary Injunction and Opposition to Defendant's Motion to Dismiss

ILLINOIS BANKERS ASSOCIATION, AMERICAN BANKERS ASSOCIATION, AMERICA’S CREDIT UNIONS, and ILLINOIS CREDIT UNION LEAGUE, Plaintiffs,

v. KWAME RAOUL, in his official capacity as Illinois Attorney General, Defendants.
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INTRODUCTION

Plaintiffs’ Motion for a Preliminary Injunction—supported by fifteen detailed factual declarations—demonstrated why this Court’s intervention is urgently required to stave off the massive costs of preparing to comply with an ill-conceived and preempted Illinois law. If allowed to take effect, the Interchange Fee Prohibition Act (“IFPA”) would require banks, savings banks, credit unions, and networks worldwide to overhaul payments systems that allow consumers and merchants to instantly consummate millions of transactions every day. But the law is preempted under multiple sources of federal law and, in turn, invalid under state and federal law that guarantee state-chartered institutions competitive parity. A preliminary injunction would save millions of dollars’ investment in new automated systems and mindbogglingly burdensome manual processes that will all be wasted when the law—which threatens systems that “are fundamental to safe and sound banking” and “drive the Nation’s economy,” OCC Br. 1; . at 2 (noting “extraordinary uncertainty” and “debilitating operational challenges”)—is eventually found invalid.

Attorney General Raoul (the “AG”) spends many pages raising baseless threshold arguments to try to duck the merits. His lead claim is that Plaintiffs have not shown, for purposes of , that he has authority to enforce the IFPA’s Fee Prohibition. But the AG never actually states that he lacks authority; in fact, he enjoys broad authority founded in the common law to represent the state’s interests, including by seeking civil penalties. He next rolls out a bewildering series of arguments against standing—ranging from a claim that Plaintiffs’ injuries will not be redressed by an injunction, to a contention that Plaintiffs are not injured at all by the Data Usage Limitation, to a wholly novel argument that preliminary injunction lacks value because is not permanent. Plaintiffs address these points in detail below, but taking a step back: this is a routine pre-enforcement challenge to a statute that is already imposing costs on Plaintiffs’ members as they attempt to come into compliance in time for its effective date. Plaintiffs’ injuries are mounting now. And because the AG has enforcement authority, an injunction precluding his use of it will alleviate Plaintiffs’ injuries. This is a justiciable controversy under Article III.

On the merits, the AG never contests that national banks and other federal financial institutions have the power to receive interchange fees, process credit and debit card transactions, and use and process data. Instead, the AG quibbles over whether the degree of interference with those powers is sufficiently “extreme.” But “extremity” is not the test for preemption under the NBA or other applicable statutes, as the Supreme Court made clear just this past Term.

The AG’s remaining merits arguments fare no better. He largely ignores Plaintiffs’ explanation of why the IFPA impermissibly “affect[s]” certain rates of interest and fees and stands as an obstacle to the Federal Credit Union Act’s purposes more broadly. His scope-of-relief arguments contradict bedrock legal principles governing preemption and injunctions. And his arguments about the Electronic Fund Transfer Act fail to recognize that a federal provision can represent both a cap binding on private parties and a dictate that other governments not lower it.

Nor does the AG get anywhere on the remaining injunction factors. On irreparable harm, he largely reprises his misguided standing arguments, which fail here too. And on the balance of the equities, he rests virtually entirely on the State’s interest in not having its law enjoined. But that just begs the merits question, as a state has no interest in enforcing an unconstitutional law.

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