Delay of Illinois swipe fee law will cost consumers and businesses $500 million

WASHINGTON — The Merchants Payments Coalition today blamed bank “scare tactics” for Illinois's delay in banning swipe fees on sales tax and tips, and said the delay is estimated to elevate costs in Illinois by $500 million over the next year above what they would have been.

“Big banks’ scare tactics are costing hard working people in Illinois real money,” MPC Executive Committee member and National Association of Convenience Stores General Counsel Doug Kantor said. “$500 million may seem like pennies to credit card giants like Visa and Mastercard, but when people lose more of their money to credit card swipe fees they won’t be happy. It is mind-boggling with people concerned about affordability that credit card companies can continue to drag their feet on complying with the law – and make the people of Illinois pay the price.”

The Illinois legislature voted late Sunday night to delay implementation of the Interchange Fee Prohibition Act from July 1 of this year to July 1, 2027. The move was the second time the law, which was passed in 2024 and originally set to take effect July 1, 2025, has been delayed amid heavy lobbying by the card industry. Once it takes effect, the measure will ban credit card and debit card swipe fees from applying to the sales tax and tip portions of transactions, saving Illinois business and their customers over $500 billion a year.

The law was challenged by banks shortly after it was passed, but was upheld in February by a federal judge who rejected their claim that it is preempted by federal banking law. U.S. District Judge Virginia Kendall said the measure is not preempted because swipe fees are set by Visa and Mastercard, which are not banks and therefore not subject to the National Bank Act. Banks have appealed the ruling to the 7^th U.S. Circuit Court of Appeals, which sent the case back to Kendall last month after the Office of the Comptroller of the Currency nonetheless issued a rule contending that the National Bank Act preempts the Illinois law and similar measures from applying to nationally chartered banks. Both sides are waiting for a ruling.

The developments in Illinois come as Colorado legislation to ban swipe fees on sales tax awaits Gov. Jared Polis's signature. Similar legislation has advanced in the Pennsylvania and Delaware legislatures this spring.

As the states move forward, Congress is considering the Credit Card Competition Act to address swipe fees overall rather than just those on sales tax and tips. President Donald Trump endorsed the CCCA in January, saying it is needed “to stop the out of control Swipe Fee ripoff.”

Overall credit and debit card swipe fees have increased 80% since the pandemic, reaching a record $198.25 billion last year, including $4.5 billion in Colorado alone. They are most merchants’ highest operating cost after labor and are too much to absorb, driving up prices by more than $1,200 a year for the average family.

Visa and Mastercard — which control 80% of the market — each centrally set the swipe fees charged by banks that issue cards under their brands, and also block transactions from being processed over other networks that could do the job with lower fees and better security. Under the CCCA, banks with at least $100 billion in assets would enable cards they issue to be processed over at least two unaffiliated networks — Visa or Mastercard plus a competitor like NYCE, Star or Shazam. The measure is expected to result in competition over fees, security and service, saving merchants and consumers $17 billion a year.