The Illinois state legislature moved to postpone, by one year, the implementation of a law to exempt taxes and tips from credit and debit card interchange fees.
The state enacted a landmark law last year that would require bank card issuers and their networks to avoid imposing the fees on merchants for taxes and tips on any purchases as of July 1 of this year. But both chambers of the legislature passed a brief amendment Sunday that delays the effective date of the law to July 1, 2026.
The law was promoted by restaurant and retail groups because their members are adamant about finding a way to reduce the interchange fees they pay every time a consumer swipes a card to pay for goods or services. Banks that issue the cards impose the fees, alongside the card networks, as a cost for processing the transactions, and for related services.
Illinois Gov. JB Pritzker’s office didn’t immediately respond to a request for comment on whether he plans to sign the bill. He is a Democrat and both chambers of the legislature are controlled by Democrats so it’s more likely than not that he will join the effort.
Bank and payments industry opponents of the law, including the Electronic Transactions Association and the Electronic Payments Coalition, said in separate statements that they supported the delay.
The Illinois law may also yet unravel as a result of a battle over the statute in federal court. The Illinois Bankers Association and the American Bankers Association, plus some credit union groups, sued the state last August in the U.S. District Court for Northern Illinois to block the law.
Last December, a federal judge overseeing the case entered a ruling to enjoin the Interchange Fee Prohibition Act for national and state banks not based in Illinois and federal savings associations. The preliminary injunction means that about 90% of card transactions in Illinois won’t be subject to the new law at all, according to the ETA, which is working to repeal it.
“We anticipate that the court will strike down the entire statute,” ETA CEO Jodie Kelley said in the statement from the group over the weekend. “However, if the court determines that a small portion of the law is not preempted, we expect the Legislature to repeal what remains because it would uniquely disadvantage Illinois state banks and credit unions – a result clearly not intended by the General Assembly or the governor.”
Sen. Dick Durbin, a Democrat from Illinois who is also the U.S. Senate minority whip, supported the state law in court last year. He has long battled what he considers a card network duopoly controlled by Visa and Mastercard.
Other states are mulling how to follow the Illinois lead. California, Colorado, Nevada, Texas and Vermont are among 11 states considering bills seeking to ban the card swipe fees on sales tax and gratuities, according to the ETA. The legislation is being pushed by retailers and restaurants that would benefit from reducing interchange fee costs.
The ETA, which aims to block the state measures, counts card issuers, processors and networks as members, including Bank of America, Fiserv, Mastercard and Visa.
