A controversial credit card law that has been hotly debated in Illinois has been delayed once again amid ongoing legal challenges.
The Interchange Fee Prohibition Act, dubbed the “credit card chaos” law by opponents, will now be delayed another year, lawmakers decided in Springfield.
The act, which would prohibit banks, credit unions and credit card companies from collecting so-called “swipe fees” on the sales tax portion of transactions, as well as on tips paid using debit and credit cards, first passed in 2024 and was expected to take effect on July 1.
The law still allows for the fees to be collected on the actual sale prices of items, but banks and credit card companies have said that the legislation would create huge challenges and could result in significant financial penalties for non-compliance, and as a result the legislation has been challenged in court and has come under federal scrutiny.
The Office of the Comptroller of the Currency, a federal agency, issued a notice earlier this year arguing Illinois can’t legally limit swipe fees for federally chartered banks.
The law was also challenged in Illinois courts, with a federal judge ruling in the state’s favor. That ruling was appealed, but an appeals court has sent the measure back to district court for a ruling, according to attorneys.
Critics of the law praised the delay by Illinois lawmakers Monday.
“We thank House Speaker Chris Welch, Senate President Don Harmon and members of the General Assembly for recognizing the disruption and uncertainty this law continues to create for Illinois consumers and financial institutions,” Ben Jackson, executive vice president of the Illinois Bankers Association. “Illinois banks play a critical role in helping families, local businesses and neighborhoods succeed. Lawmakers should fully repeal the IFPA before this flawed law harms the communities that rely on them.”
Some said the delay wasn’t enough.
“Illinois consumers and local financial institutions deserve more than another temporary delay. They deserve certainty. They deserve a workable policy. And they deserve a permanent solution,” Electronic Payments Coalition Executive Chairman Richard Hunt said in a statement.
But proponents of the bill say the delay is a setback for consumers and small businesses.
“For the second year in a row, Illinois lawmakers chose to protect the bottom line of big banks, credit card companies and payment processors over ensuring meaningful financial relief for consumers, neighborhood retailers, restaurants and bars. At a time when lawmakers claim to be focused on improving affordability and supporting community businesses, this action stands in sharp contrast to their words,” Rob Karr, president and CEO of the Illinois Retail Merchants Association, said in a release. “The fight against onerous swipe fees is not over, and we remain hopeful the courts will ultimately uphold this vital relief package.”
What is the Interchange Fee Prohibition Act?
Shoppers have likely noticed that some retailers have begun charging different prices for cash or credit transactions. The difference, generally involving a fee of 1-to-3%, comes as a result of fees assessed by financial institutions on all card-based transactions, known commonly as “swipe fees.”
The state of Illinois is seeking to prohibit those companies from assessing the fees on certain portions of transactions, namely on the collection of sales taxes and on tips given to servers at restaurants, bars and other retailers.
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