The FDIC has proposed a rule interpreting Section 24(j) of the Federal Deposit Insurance Act, enacted as part of The Riegle-Neal Interstate Branching and Banking Efficiency Act of 1994, to provide parity between out-of-State state and national banks insofar as preempting host state laws even when the out-of-state, state bank provides services in a host State without maintaining a physical branch. The FDIC Board approved the proposal on September 17, and it was published in the Federal Register on September 22. Comments are due no later than November 23, 2026.

The proposal is significant in light of litigation over the legality of the Illinois Interchange Fee Prohibition Act (IFPA). The IFPA makes it unlawful to charge an interchange fee on taxes and gratuities charged in connection with a payments card purchase of goods or services and restricts the collection and use of data related to such transactions. On June 1, 2026, the Federal District Court for the Northern District of Illinois, upon remand from the Seventh Circuit Court of Appeals, held that federal law preempts the IFPA as applied to national banks, federal savings associations, payment card networks, and out-of-State state banks covered by Section 24(j). The case is now back in the Seventh Circuit. A threshold issue is whether Section 24(j) applies to all host state laws or just host state laws that pertain to community reinvestment, consumer protection, fair lending and the establishment of intrastate branches. Since the IFPA would likely be considered a consumer protection statute, it seems unnecessary to determine whether Section 24(j) was only intended to provide parity with national banks for host state laws that are in one of the four categories of host state laws cited above.

The most important issue is whether Section 24(j)’s reference to a “branch in the host State” limits national bank parity immunity from the application of host state laws to state banks with physical branches in the host state.

The FDIC proposes that it does not. If a host-State law does not apply to an out-of-State national bank, the same law generally would not apply to an out-of-State state bank providing the same services, even without a physical branch. The bank’s home-State law would apply instead. The FDIC reasons that this approach preserves the state-national bank parity Congress intended as banking increasingly moves online and through other non-branch channels.

The proposal would not itself determine whether the IFPA or any other particular host state law is preempted. It would establish only the parity rule; whether a law is preempted as to the national bank remains a separate question. That inquiry is especially important after the Supreme Court opinion in Cantero v. Bank of America, which requires a fact-specific determination of whether a state law prevents or significantly interferes with national-bank powers. In the aftermath of such opinion, the First, Second and Ninth Circuit Courts of Appeal have reached conflicting decisions on whether the National Bank Act preempts state laws requiring mortgage lenders to pay a prescribed rate of interest on mortgage escrow accounts held by such lenders to pay real estate taxes and insurance remitted by borrowers to lenders. It seems likely that the Supreme Court will grant review once again in the Cantero case in order to resolve the Circuit conflict.

The OCC has issued two interim final rules stating, in so many words, that the National Bank Act preempts the IFPA even though it is the payment networks, not the bank issuer of payment cards, to which the IFPA directly applies.

Under Loper-Bright Enterprises v. Raimondo, courts must independently interpret the relevant federal statutes rather than defer to the FDIC or the OCC. The agency’s reasoning may receive persuasive weight under Skidmore, but not binding deference.

It should be noted that the proposal leaves Section 27 of the Federal Deposit Insurance Act (enacted as Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980 (“DIDMCA”)) unchanged and therefore would not affect the separate Colorado and Oregon litigation concerning interest rate opt-out laws enacted by such states pursuant to Section 525 of DIDMCA and whether they result in Colorado’s and Oregon’s usury laws applying to state banks located outside those states lending money to residents of those states.

If finalized and upheld, the FDIC proposal could reduce disparities between national and state-chartered banks engaged in interstate banking. Its effect will depend on the scope of Section 24(j), the development of National Bank Act preemption law after Cantero, and whether courts accept the FDIC’s interpretation of “branch.”