A federal judge ruled Tuesday that key parts of Illinois’ first-in-the-nation law banning certain credit card fees can go into effect this July. U.S. District Judge Virginia Kendall’s decision allows the law to proceed, despite ongoing challenges from financial institutions.
Illinois Swipe Fee Law: What Happened
The law, passed in 2024, prohibits financial institutions from charging “interchange fees” – often called swipe fees – on the tax and tip portions of credit and debit card transactions. The goal is to lower costs for retailers and, consumers. Yet, parts of the law governing data usage were blocked by the judge.
The American Bankers Association, Illinois Bankers Association, America’s Credit Unions and Illinois Credit Union League, who brought the case against the state, have stated they plan to appeal the ruling. They argue the law will create “chaos and confusion” for Illinois businesses and consumers.
Why This Matters
This case is significant because Illinois is the first jurisdiction in the nation to attempt to regulate these types of fees. Rob Karr, president and CEO of the Illinois Retail Merchants Association, called the ruling “a historic win for Main Street over Wall Street,” and expressed hope that other states will follow suit.
Financial institutions have maintained that implementing the law would be burdensome and costly, potentially impacting both their industry and consumers. The Electronic Payments Coalition and the Electronic Transactions Association, representing companies like Apple, Amazon, Mastercard, Visa, and Chase, have also voiced their disappointment with the court’s decision.
What’s Next?
The plaintiffs – representing banking and credit union interests – are expected to appeal the decision to the Seventh Circuit. Depending on the outcome of that appeal, the law could be further delayed or potentially struck down entirely. If the ruling stands, Illinois will become the first state to implement these restrictions on interchange fees, and it could set a precedent for other states considering similar legislation. It is also possible that state legislators could revisit the law, despite previous support for the measure.
Frequently Asked Questions
What does this law do?
The law bans financial institutions from charging interchange fees on the tax and tip portions of credit and debit card transactions.
Who is challenging the law?
The American Bankers Association, Illinois Bankers Association, America’s Credit Unions and Illinois Credit Union League are challenging the law.
When will the law take effect?
The law is currently set to take effect this July, but this is contingent on the outcome of the expected appeal.
As Illinois moves forward with this groundbreaking legislation, will other states consider similar measures to address credit card fees and their impact on businesses and consumers?
