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An Illinois federal judge ruled Friday that credit card companies like Visa and Mastercard must comply with Illinois' landmark law restricting certain credit card fees. However, she also held that national banks and federal savings associations are not subject to the law, at least for now.

U.S. District Judge Virginia M. Kendall partially granted a preliminary injunction temporarily halting enforcement of the Illinois Interchange Fee Prohibition Act against the banks and savings associations. She found that they are likely to prevail with their argument that the National Banking Act preempts the law's interchange fee prohibition and its data usage limitation provision.

Similarly, the judge said they demonstrated a likelihood of success on the merits of their argument that the law's data usage limitation "violates the rights of national banks and is preempted by the NBA."

However, Judge Kendall ruled that the preemptive effect of the National Banking Act's provision of rights to national banks "does not extend to other, non-national bank or savings associations participants in credit and debit card transactions, including card networks like Visa or Mastercard."

She largely rejected the Illinois attorney general's request to throw out the suit, only agreeing to dismiss the banking trade groups' state law claims.

The first-of-its-kind law bans the collection of interchange fees to compensate for the cost of processing card transactions on any sales taxes, excise taxes, and gratuities included in a consumer's credit or debit card transaction with a merchant in the state.

Merchants argue that the measure would save them millions in fees for handling tax and tip money that belongs to others, such as the government or employees. However, banking industry groups contend the law violates multiple federal laws and cannot be enforced against federal and state-chartered financial institutions or their payment card networks and service providers.

The suit was filed in August by the American Bankers Association, Illinois Bankers Association, America's Credit Unions, and the Illinois Credit Union League. It names Illinois Attorney General Kwame Raoul as the defendant.

Notably, Judge Kendall said Friday that the state law appears at odds with federal statutes, saying the interchange fee prohibition "threatens to undermine Congress's creation of a national banking system."

"A state law — which imposes such a limitation on a national bank's power — is also at odds with how Congress intended the NBA would operate, according to its legislative history," the judge said.