- Key insight: The Illinois General Assembly is deferring the effective date of the Illinois Interchange Fee Prohibition Act to July 1, 2027, delaying it by a year.
- Expert quote: "We see nothing unique about taxes or tips. What would prevent a state from barring interchange fees on groceries, fuel or other necessities? To us, it is the same principle," TD Cowen analyst Seiberg wrote.
- Forward look: An appeals court ruling on the Illinois law is expected this month, meanwhile Colorado Gov. Jared Polis, a Democrat, has a similar law awaiting his signature.
The Illinois General Assembly on Monday voted to once again delay implementation of a ban on interchange fees on the tax and tip portions of transactions, the second such delay amid ongoing litigation, pushing the new effective date back to July 1, 2027. The state
Bank trade groups, which sued to block the law shortly after its passage in 2024, celebrated the delay, saying they would continue to fight for striking the law down in court. The statement comes from the The American Bankers Association, Illinois Bankers Association, America's Credit Unions and the Illinois Credit Union League, plaintiffs in the ongoing case.
"This reasonable step will protect Illinois businesses and consumers from facing payment chaos in just a month, without interrupting our ongoing legal challenge," the trade groups wrote. "We remain confident in the strength of our case and look forward to securing permanent relief from this misguided law."
The embattled Illinois Interchange Fee Prohibition Act would ban firms from charging swipe fees on sales tax and gratuity portions of charges. The dispute between trade groups representing merchants and the financial industry, respectively, comes after a growing number of states move to block interchange on portions of transactions. Banks say they are necessary to pay for fraud prevention, the cost of processing the transaction and offsetting the costs of credit card rewards. The fees are set by the card networks like Visa or Mastercard and often are around 2% to 3% of a transaction. Merchants
The Colorado House of Representatives
A federal judge
Critics of interchange fees — including merchant trade groups —
In response to the delay, the Illinois Retail Merchants Association expressed disappointment that state officials chose to push the law's effective date back, saying they will continue to fight in court.
"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," said Rob Karr, president and CEO of the Illinois Retail Merchants Association. "The fight against onerous swipe fees is not over, and we remain hopeful the courts will ultimately uphold this vital relief package."
TD Cowen research analyst Jaret Seiberg said in the wake of the decision that his firm is confident in banks' chances, but signaled that this court case is particularly crucial for the precedent it would set, "if even part of this ban is able to remain in place."
"We see nothing unique about taxes or tips. What would prevent a state from barring interchange fees on groceries, fuel or other necessities? To us, it is the same principle," Seiberg wrote. "If the government can block some interchange fees, then it can block more interchange fees."
