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The Interchange Fee Prohibition Act was signed into law by Gov.
J.B. Pritzker and is set to take effect in July 2025, making
Illinois the first state to exempt taxes and tips from
interchange fees.
Rob Karr, the president of the Illinois Retail Merchants
Association, said their poll shows Illinoisans are in favor of
the law.
“Eighty-six percent of voters agree that it is unfair for banks
and credit card companies to charge businesses swipe fees on the
sales taxes they collect for the state of Illinois and units of
local government,” said Karr.
Karr said 82% of those polled said that it is unfair to workers
and businesses to charge swipe fees on tips, and the notion that
a card would have to be swiped twice is not true.
“Think about it, it’s laughable on its face,” said Karr. “When
you go to a place that does tips, does your card get swiped
twice, no. The server takes it, swipes it, brings it back, then
you put in the amount.”
A new study released by Culloton + Bauer Luce analyzing the cost
implications of an Illinois credit card law shows corporate
mega-stores will be the largest beneficiaries of the law, which
carves tax and tip out of credit card interchange. According to
the report, 40 of the largest retailers will soak up nearly 40%
of the estimated $118 million reduction in interchange.
Jose Garcia, president of Northwest Community Credit Union in
Morton Grove, said he is concerned about the costs of this
implementation on small businesses.
“I think the small businesses, the mom-and-pop stores, they will
have to upgrade their equipment and I’m sure that the developers
of the technology are not going to do it for free,” said Garcia.
Garcia adds that Illinois will be in a vulnerable position to be
the guinea pig of a new system that has yet to be created.
Banking and credit union groups have filed a lawsuit against the
state of Illinois, seeking to block the ban on applying
interchange fees to sales taxes and tips. The lawsuit was filed
by the Illinois Bankers Association, American Bankers
Association, America’s Credit Unions, and the Illinois Credit
Union League, alleging that Illinois is interfering with the
federal government’s exclusive regulatory authority over various
federally-chartered financial institutions. |
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