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The Interchange Fee Prohibition Act doesn’t ban or restrict
credit card swipe fees, but it limits banks from charging
interchange fees on tax and tip revenues. The trade groups
argued in the U.S. District Court for the Northern District of
Illinois that the law would “throw well-operating payment card
systems into chaos.”
“We’re joining together in this legal challenge to protect
Illinois consumers, small businesses and the financial
institutions that serve them from the unprecedented chaos and
confusion this new state law would create,” said Rob Nichols,
president of the American Bankers Association. “We also joined
this lawsuit to strongly defend the dual banking system
President Lincoln created in 1863 that has served our nation so
well."
Critics said the law will require consumers to swipe their card
twice for a single transaction, one for the purchase of the
goods or services subject to interchange and one for the tax or
gratuity not subject to interchange.
The filing outlines how the new Illinois law violates multiple
federal statutes including the National Bank Act and the Federal
Credit Union Act and cannot be enforced against national or
state-chartered banks, federal or state savings institutions,
federal or state-chartered credit unions, nor their service
providers.
The financial industry is concerned that if Illinois’ law is
allowed to stand, other states could follow suit.
Gov. J.B. Pritzker said the change was the best outcome for
Illinois retailers, who will also be capped in the discount they
get for collecting and remitting sales taxes.
The Illinois Retail Merchants Association said the law would
provide tangible relief to Illinois workers, families and
businesses by limiting the fees financial institutions can
charge on transactions.
The plaintiffs will seek a preliminary injunction halting
implementation of the new law while the court decides the merits
of the case.
The law is set to take effect July 1, 2025, unless a court steps
in and blocks the implementation of the legislation.
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