SPRINGFIELD, Ill. (Capitol News Illinois) – Illinois lawmakers have decided to delay a ban on “swipe fees” for another year as bankers are locked in a court battle with the state over the ban.
Lawmakers passed the Interchange Fee Prohibition Act last spring as part of the legislative package that enacted the state budget. It prohibits financial institutions from charging fees on the tax and tip portions of credit and debit card transactions. The rest of the transaction, including the price of goods or services, would still be subject to the fees.
The ban was supposed to take effect on July 1, but lawmakers voted with strong bipartisan majorities Sunday morning to pass House Bill 742 to push the ban back until July 2026.
Banking groups filed a lawsuit last August challenging the law on the grounds it superseded federal banking regulations. Bankers argued the law forces banks and credit card companies to implement costly new computer systems to differentiate between the transaction, tax and tip, and contended they can’t comply with the law by July 1.
Read more: Judge declines to extend ‘swipe fee’ injunction to credit unions, applies it to out-of-state banks
A federal judge issued a preliminary injunction in December preventing the law, once it takes effect, from applying to federally chartered banks while declining to extend the injunction to state banks and credit card companies.
In February, the judge declined to extend the injunction to credit unions, though it was extended to out-of-state banks that operate in Illinois. The case has remained unresolved in the courts since then, leading lawmakers to push back the start of the ban.
The measure pushing back the effective date still needs approval from Gov. JB Pritzker.
Banking groups supported the delay and continued their messaging campaign against the underlying legislation that passed a year ago.
“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,” Illinois Bankers Association Executive Vice President Ben Jackson said in a statement.
The ban was a request of the Illinois Retail Merchants Association as part of a deal during budget negotiations last spring. State lawmakers capped a monthly sales tax deduction claimed by retailers at $1,000 to generate $101 million to fill a budget hole. In exchange, lawmakers passed the ban on swipe fees.
IRMA said in a statement it was disappointed lawmakers have decided to delay the ban.
“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,” IRMA CEO Rob Karr said in a statement.
However, other business groups such as the Illinois Chamber of Commerce said lawmakers made the right decision and urged the legislature to fully repeal the law.
(Reporting by Ben Szalinski, Capitol News Illinois)
Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.
Comments