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The state law prohibits a credit card holder’s bank from
charging or receiving interchange fees on portions of
transactions, including taxes and gratuities. A judge recently
ruled that financial institutions chartered outside Illinois
that conduct business within the state do not have to comply
with the law.
Supporters of the law, namely the Illinois Retail Merchants
Association, argue that it will be an easy transition as some
laws already prohibit interchange fees on certain purchases. The
group conducted a poll on the subject.
“Eight-six percent of voters agree that it is unfair for banks
and credit card companies to charge businesses swipe fees on
sales taxes they collect for the state of Illinois and units of
local government,” said IRMA President Rob Karr.
Eric Cohen, CEO of Merchant Advocate, said the law would be very
challenging for Illinois businesses, especially the mom-and-pop
stores.
“When looking at the intricacies you have to do, I think
business owners that understand it would probably say ‘you guys
are out of your mind, how do you want us to implement this,’”
said Cohen.
Banking groups filed a lawsuit last August challenging the state
law on the grounds it superseded federal regulations on banks.
They argue the law forces banks and credit card companies to
implement costly new computer systems to differentiate between
the transaction, tax and tip.
“We strongly believe that applying any part of this law to any
party in the payment system, a bank or credit union, card
network is fundamentally flawed,” said Ben Jackson, vice
president of government relations with the Illinois Bankers
Association.
Cohen believes the next court hearing on the law may not be the
last.
“Everything surrounding Visa, MasterCard, interchange and
regulations drags out for years and years, this one especially
because it was so specific to a certain state,” said Cohen.
Illinois is the only state that has passed a law to prohibit and
reshape how interchange fees are charged.
The next hearing on the lawsuit is scheduled for Thursday, March
6 in Chicago. |
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