Merchants ask OCC to reverse swipe fee preemption

• Key insight: A trade group representing retailers says the Office of the Comptroller of the Currency rule wrongfully shields credit card operators and banks from oversight imposed by states.
• Supporting data: Merchants paid nearly $200 billion in interchange fees last year.
• Forward look: An appeals court ruling on Illinois' 2024 swipe fee law expected by mid-June, and Colorado Gov. Jared Polis, a Democrat, has a similar law awaiting his signature.

The Merchants Payments Coalition urged the Office of the Comptroller of the Currency on Friday to withdraw its recent move to nullify state-level swipe fee bans.

In a Friday comment letter responding to a preemption determination the agency issued last month, the trade group representing merchants and businesses, says the rule would allow banks to continue charging fees set in coordination with card networks, over which large banks have significant influence.

"The OCC's interim final rule and order directly contradict President Trump's call to end the 'swipe fee ripoff' by preserving and endorsing a system in which card networks centrally set interchange fees that banks uniformly charge merchants," MPC said in the letter. "Rather than promoting competition or lowering costs for consumers, the rule reinforces a pricing structure that drives up the cost of accepting card payments and ultimately raises prices across the economy."

The dispute between merchants and the financial industry 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 paid nearly $200 billion in such fees last year.

The Illinois Interchange Fee Prohibition Act would ban firms from charging swipe fees on sales tax and gratuity portions of charges. Following litigation-related delays, the measure is set to take effect July 1. 

Banks sued to block the law shortly after its passage in 2024, saying the rule is technically unworkable, acts as a price control and could cost issuers millions. 

The Colorado House of Representatives passed a similar measure Wednesday banning banks from charging interchange fees on the sales tax component of transactions. The bill was sent to Democratic Governor Jared Polis's desk, where it remains for his consideration. If enacted, it would be the second such law to be enacted on the state level. 

The state has subsequently moved to delay the law's implementation for a year. A federal judge ruled in February to uphold the law; plaintiffs have appealed the district court's ruling, and a ruling on that appeal is expected by mid-June. The OCC moved to preempt Illinois' ban last month, issuing two interim final rules affirming banks' authority to charge fees set by third parties and explicitly preempting Illinois' swipe fee ban as of June 30, 2026.

Politics and policy

Bank trades push court to consider Illinois swipe fee law

May 28, 2026 3:36 PM

By Claire Williams

Critics of interchange fees — including merchants — say payment systems are opaque and unavoidable for merchants, who have little bargaining power over what is a major cost of doing business.

"These fees are not negotiated individually in a competitive market but instead are centrally established by the major card networks, which set standardized fee schedules that card-issuing banks agree to collect. Because merchants must accept card payments to remain competitive, they have little ability to avoid or negotiate these costs," the MPC argued in its Friday letter. "Those costs are ultimately borne not only by merchants, but also by consumers, as increased payment processing expenses are incorporated into the prices of everyday goods and services, reducing affordability across the broader economy."

Financial policy analysts like TD Cowen's Jaret Seiberg have said the fight over state swipe fee bans will likely come down to whether banks feel legally protected continuing to charge interchange fees in states challenging the practice. If merchants create enough uncertainty and litigation risk to push banks toward seeking congressional action, that could lead lawmakers to authorize Federal Reserve regulation of credit card interchange fees the way they do for debit interchange.