For decades, two layers of law sat on top of what a credit union charged for an account. A federal layer set the outer boundaries, and a state legislature could tighten certain charges further. As of the end of June, for federally chartered credit unions, only one of those layers still operates. A National Credit Union Administration rule that took effect June 30 declares state limits on non-interest charges and fees inapplicable to federal credit unions.
What new 12 CFR 701.5 puts under federal control
The rule adds a section to NCUA’s regulations that did not exist before. Its first subsection reads that a federal credit union may “determine the types of fees or charges and other matters affecting the opening, maintaining and closing of a share, share draft or share certificate account,” and then adds the operative sentence: “State laws regulating such activities are not applicable to Federal credit unions.”
A later subsection names the charges more precisely. It provides that a federal credit union “may charge non-interest charges and fees, including share account service charges and interchange fees from credit and debit card operations.” In credit union vocabulary a share account is the savings account and a share draft account is the checking account, so the sentence reaches the routine service charges attached to both. The agency’s interim final rule at 91 FR 34725 carries the full text.
NCUA’s own announcement put the point without hedging. State rules regulating that activity, the agency said, “are not applicable to FCUs,” and NCUA described itself as holding “exclusive authority” over a federal credit union’s ability to charge non-interest charges and fees. The agency also said it acted partly to avoid a gap between federal credit unions and national banks, since the Office of the Comptroller of the Currency had just issued an interim final rule on the same subject for the banks it supervises.
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Federal charter or state charter decides who is covered
The reach of the document is narrower than the phrase “credit unions” suggests. It applies to federal credit unions, meaning institutions chartered and supervised by NCUA. The text never extends the preemption to state-chartered credit unions, including the state-chartered institutions whose member accounts NCUA insures through the Share Insurance Fund.
For a member, that turns an abstract question of charter type into a concrete one. Two credit unions in the same town can now sit under different fee law: the federally chartered one operating free of a state cap, the state-chartered one still bound by it. A member who wants to know which set of rules governs an account has to know which regulator issued the charter, and that is a question for the credit union or for NCUA’s public credit union records rather than for the fee schedule itself.
The Illinois interchange law the rule was written to displace
The rulemaking has a named target. The preamble states that the interim final rule “is intended to preempt any state law affecting the non-interest charges and fees related to payment card services, including the IFPA,” a reference to the Illinois Interchange Fee Prohibition Act. Interchange is the fee a merchant’s side of a card transaction pays to the card-issuing institution, and Illinois had legislated on it.
The litigation history sits in the rule’s own footnotes. A federal district court in the Northern District of Illinois issued an opinion in Illinois Bankers Association v. Raoul in February 2026, and on June 1, 2026, following the OCC’s parallel action, that court granted a permanent injunction against the Illinois law as applied to national banks. NCUA’s rule extends the same result to federal credit unions by regulation rather than by litigation.
Interim final, not final: the comment window closed July 9
The action line on the document reads “Interim final rule; request for comment.” That is a specific procedural posture: the text is binding now, but NCUA skipped the usual proposal-and-comment sequence and has said it intends to issue a final rule after reviewing what came in. Comments were due July 9, 2026, and that window has closed.
The Government Accountability Office documented the shortcut in a Congressional Review Act report dated July 24, 2026 to the Senate Banking and House Financial Services committees. GAO recorded that NCUA received no notice-and-comment period beforehand, prepared no cost-benefit analysis, and justified the speed by pointing to the compressed timeline between the February court opinion and the Illinois law’s effective date. The report also notes that the Office of Information and Regulatory Affairs classified the action as economically significant and that NCUA itself acknowledged the rule “preempts state laws and therefore constitutes a policy that has federalism implications.”
Where the rule stops, including overdraft and NSF caps
The document is narrower than some early summaries of it. The words “overdraft,” “NSF” and “insufficient funds” appear nowhere in the rule’s text. Nothing in it supports a claim that state limits on overdraft or nonsufficient-funds charges have been swept aside, and a member reading about the rule should treat those charges as governed by whatever law applied before.
The fee authority is also conditioned rather than open-ended. The same sentence granting a federal credit union power over account charges requires it to act “consistent with this section, parts 707 and 740 of this subchapter, other Federal law, and its contractual obligations.” Part 707 is NCUA’s Truth in Savings rule, which governs how account terms and fees must be disclosed, and Part 740 governs advertising. Preemption removed a state ceiling on the amount; it did not remove the federal duty to disclose the charge before a member agrees to the account.
This article was produced with AI assistance and reviewed by a human editor. Figures are linked to their primary sources; where a claim could not be verified from the public record, we say so.
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