FMI joins retailers challenging federal swipe fee rules

WASHINGTON – FMI – The Food Industry Association and eight other merchant trade organizations have filed two federal lawsuits challenging banking regulations they say improperly block an Illinois law that prohibits credit and debit card swipe fees on sales taxes and tips.

The lawsuits, filed Thursday in U.S. District Court in Washington, D.C., challenge rules issued earlier this year by the Office of the Comptroller of the Currency (OCC) and the National Credit Union Administration (NCUA). The associations contend that the agencies overstepped their authority and violated federal rulemaking requirements.

Illinois’ Interchange Fee Prohibition Act, passed in 2024, would prohibit credit and debit card networks from charging merchants interchange fees on the sales tax and gratuity portions of transactions. Originally set to take effect on July 1, 2026, the law has been delayed by one year due to legal challenges.

Merchant groups estimate the legislation could save Illinois businesses and their customers more than $500 million each year.

“Grocery shoppers are already watching every dollar at the checkout, and every added cost in the system matters,” said Leslie G. Sarasin, president and CEO of FMI. “Grocers should not be charged swipe fees on sales tax and tips — money they collect and pass through in full to governments and employees and do not keep as revenue. Ending these fees helps ensure more of every dollar spent at the grocery store goes toward keeping prices for food and essential household needs as low as possible.”

The legal dispute centers on whether federal banking laws preclude states from regulating interchange fees set by payment card networks, including Visa and Mastercard.

In February, U.S. District Judge Virginia Kendall rejected arguments that federal banking law preempted Illinois’ legislation. However, after the OCC issued an interim rule in April, Kendall ruled the state law invalid in June. The NCUA subsequently issued a similar rule, and the court expanded its injunction in September.

Illinois Attorney General Kwame Raoul announced plans to appeal the rulings in October.

The merchant associations contend that interchange fees, which they estimate at nearly $200 billion annually nationwide, raise retailers' operating costs and ultimately contribute to higher consumer prices.

“Independent grocers operate on razor-thin margins, and every dollar lost to excessive credit card swipe fees is a dollar that could otherwise go toward keeping groceries affordable, investing in employees and serving local communities,” said Greg Ferrara, president and CEO of the National Grocers Association.

The lawsuits were filed by FMI; the National Retail Federation; the Retail Industry Leaders Association’s Retail Litigation Center; the National Grocers Association; the National Association of Convenience Stores; the National Restaurant Association’s Restaurant Law Center; the Illinois Retail Merchants Association; the Illinois Fuel and Retail Association; and the Illinois Restaurant Association.

The associations are asking the court to invalidate the federal rules, arguing that the agencies improperly exercised their regulatory authority to prevent Illinois from implementing the legislation.