Amid challenge from banks, Illinois legislators move to delay ban on certain credit card fees
Illinois legislators voted to delay for one year a ban on certain credit card fees that was set to take effect July 1 amid a legal challenge by banks.
A measure passed by legislators and signed into law by Gov. JB Pritzker last year would prevent banks and credit card companies from charging retailers a small fee on sales taxes and tips. Pritzker still has to sign off on the legislature's move to extend the deadline to July 1, 2026.
Pritzker on Sunday said that while the delay wasn't his initiative, he anticipated the interchange fee issue 'will probably get resolved over the next year' as it is currently with the courts.
Retailers who support the measure say the fees come at a cost to consumers. Banks say the law would create large costs within the payment processing system and inconvenience both businesses and customers. They've also said don't have the infrastructure in place to implement the ban.
'On the banking side, certainly, the technology doesn't exist, nor do we think it will any time soon,' Ben Jackson, executive vice president of government relations at the Illinois Bankers Association, said Monday. The technology needed will still not be ready by July 2026, he said.
Rob Karr, president and CEO of the Illinois Retail Merchants Association, said in a statement Sunday that the delay would take money out of the pockets of Illinoisans and businesses by continuing to allow the fees.
'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's driving up prices and making it harder for families and businesses to make ends meet,' Karr said.
The provision on so-called interchange fees was tucked into last year's revenue bill in an effort to provide relief to retailers as the state enacted some $101 million in tax hikes on retailers. Banks ever since then have said the effective date was too soon.
Illinois would be the first state to require a distinction on consumer retail transactions between goods, taxes and tips, creating the need for what opponents say would be a complicated and expensive software change.
While the fight over over the ban reflects the national political battle between interest groups representing retailers and financial services like Visa and MasterCard, the Illinois law is separate from federal legislation on interchange fees that has been pushed by U.S. Sen. Dick Durbin.
The federal lawsuit filed by the banking interests that challenges the ban has inched forward throughout the spring but it wasn't clear whether a final ruling would be reached by July 1.
Financial companies scored a partial victory in court when a federal judge in December agreed to put a temporary hold on the law for some types of institutions including national banks, meaning that they don't need to comply with the law as court proceedings continue. That relief was later expanded to out-of-state banks doing business in Illinois, but other entities including in-state banks remain subject to the law.
The IBA as well as the American Bankers Association, America's Credit Unions and the Illinois Credit Union League are plaintiffs in the suit, which names Illinois Attorney General Kwame Raoul as a defendant.
An effort to repeal the law completely did not advance the spring legislative session, while the vote for the delay came on the session's last day.
The Electronic Transactions Association, an association representing large companies including Visa, American Express and Bank of America, issued a statement Sunday applauding the decision to put the ban off for the year.
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