FDIC proposes parity rule for out-of-State State banks

The Federal Deposit Insurance Corporation has issued a notice of proposed rulemaking, RIN 3064-AG34, to amend 12 CFR Part 331. The amendment would recognize parity between out-of-State State banks and national banks concerning the application of host State laws when the banks provide services outside their chartering State.

Under the proposal, for purposes of section 24(j) of the Federal Deposit Insurance Act, any host State law that does not apply to a national bank would likewise not apply to an out-of-State State bank offering services in that State, whether through a branch or without one. The rule would treat the chartering State's law as controlling for such banks, mirroring the treatment already afforded to out-of-State national banks.

The change is prompted by recent litigation involving Illinois's Interchange Fee Prohibition Act (IFPA). While a district court injunction barred enforcement of the IFPA against national banks and other federally regulated entities, the court left unresolved whether the same host State restrictions apply to out-of-State State banks that lack a physical branch. The FDIC's proposal seeks to eliminate that uncertainty and restore a level playing field.

Comments on the proposal must be received by November 23, 2026. Submissions may be made through the FDIC website, by email, or by mail to Jennifer M. Jones, Deputy Executive Secretary, at 550 17th Street NW, Washington, DC 20429. The notice, along with a 100-word summary, is available at https://www.fdic.gov/federal-register-publications.

If finalized, the amendment would align the regulatory treatment of out-of-State State banks with that of national banks, reducing legal ambiguity for banks operating across state lines and for merchants and consumers who rely on payment-card transactions.