Client: Interchange Fee Prohibition Act
Source: Crain’s Chicago Business
The Illinois General Assembly pushed back by a year implementation of its controversial Interchange Fee Prohibition Act, which would exempt state and local taxes and tips from so-called swipe fees charged by credit card processors.
Trade groups representing banks and credit unions have sued the state to block implementation of the law, which was set to go into effect on July 1 before the last-minute change by lawmakers.
“This law will cause widespread economic disruption, and mounting evidence shows that the measure overwhelmingly benefits corporate megastores while placing an undue financial burden on small businesses and smaller financial institutions that form the backbone of our local economies,” Ben Jackson, executive vice president of the Illinois Bankers Association, said in a statement. “In the coming months, we will urge the Illinois General Assembly to act in the best interest of their constituents by fully repealing this law.”
Bankers, credit card companies and airlines such as United — who rely heavily on the profits they make from credit card partnerships — opposed the law from the outset, claiming compliance costs could run into the tens of millions for some credit card issuers.
The banking lobby has said it has no workable technology to comply with the law, the first of its kind, and could force consumers and retailers to conduct two separate transactions for one purchase.
Merchants have backed the law, saying it would save consumers and small businesses money.
“By refusing to require compliance as originally intended, legislators are again taking hundreds of millions of dollars out of the pockets of working families and Main Street businesses and giving it to big banks, credit card companies and credit card processors” Rob Karr, president and CEO of the Illinois Retail Merchants Association, said in a statement posted on the social media platform X. “We remain committed to ensuring this law is not delayed further and urge lawmakers to renew the promise they made to stop the swipe fee greed that is driving up prices and making it harder for families and businesses to make ends meet.”
The law was passed at the end of the spring 2024 legislative session in Springfield, when lawmakers decided to reduce the interchange fees, largely paid by merchants, on credit and debit card transactions as a way to soften the blow of a new law that would generate $100 million in state revenue by reducing the amount of money paid to merchants for collecting state and local sales taxes.