Feds block Illinois' law to reduce swipe fees
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Illinois businesses hoping for relief from credit card fees saw that effort stalled by a new federal ruling.
Why it matters: Consumers often end up absorbing those record-high credit card fees, either through credit card use charges at a store or restaurant, or through higher prices.
- This federal move halts Illinois' first-in-the-nation law to reduce those bank fees, meaning consumers will keep absorbing the charges.
Driving the news: The U.S. Office of the Comptroller of the Currency declared Friday that federal law trumps Illinois law regarding certain fees that banks can charge.
Catch up quick: Illinois lawmakers passed the Interchange Fee Prohibition Act in 2024 to limit fees banks can collect on the tax and tip portion of card transactions.
- For the past two years, bank groups have fought the law, which was set to take effect July 1.
- So far, a federal court has upheld the measure, but banks have appealed.
- A coalition of bank and credit union associations recently ran local TV ads suggesting the law could prevent consumers from using cards to pay taxes and tips and warning of "credit card chaos."
What they're saying: "If the OCC rule stands, the Trump administration will have come in on the side of the banks, and they will deprive relief for Illinois businesses and consumers," Rob Karr of the Illinois Retail Merchants Association (IRMA) tells Axios.
The other side: Ann Petros, a vice president at America's Credit Unions, tells Axios her organization is pleased with the federal order. She says potential lost revenue from the law, estimated in the tens of millions, could reduce funds for important credit card programs.
- "These include fraud prevention services, rewards programs, adopting new technologies to better deploy and facilitate the payments process. So all of those elements are at risk as a result of the IFPA," she says.
- Axios requested comment from the OCC and the Illinois Bankers Association, but got no immediate response.
Between the lines: Banks stand to lose millions in fees under the IFPA, and more if other states considering similar bills follow suit.
These fees disproportionately affect small businesses, as larger ones are often able to negotiate better deals.
State of play: As Illinois officials absorb the news, Karr says IRMA is reviewing options to challenge the order.
- Credit unions are anticipating a similar order from the federal agency that regulates them.
- The OCC is allowing the public to comment on its order for 30 days.
What's next: A panel of circuit court judges in Chicago is scheduled to hear arguments on the issue at a hearing on May 13.
- The court is expected to consider the OCC order in its ruling.