Gov. JB Pritzker signed a law on Monday delaying the Illinois ban on swipe fees for another year. Banks are celebrating the move while retailers express concern for the future.
Retailers only receive a portion of the money each time a card is swiped at a register, as banks and credit unions take the vast majority of funds. There was previously a bipartisan effort to ban these fees, but banks argued it could cause chaos without a compliance system. “We’re talking about a global payment system,” said Ashley Sharp, legislative counsel for the Illinois Credit Union League.
“There are international standards in card processing, and many parties must understand the process to ensure smooth transactions.”
The Illinois Retail Merchants Association (IRMA) argues that limiting swipe fees to goods and services could reduce the financial burden on consumers and retailers. Banks and retailers have spent most of the past year in a court battle over the interchange fee law. Rob Karr, IRMA President and CEO, expressed disappointment at the delay in implementing the law.
Swipe fee ban postponed
“Those fees are sometimes the second to third largest expense for a retailer,” Karr said. “We believe it shouldn’t be applied to the sales tax portion.
We’re doing that on behalf of the state and shouldn’t have to bear those costs, particularly because the state cut the retail discount.”
In December, a federal judge granted a partial preliminary injunction ruling that national banks, federal savings banks, and out-of-state banks are exempt from complying with the Illinois law. Nevertheless, Illinois-chartered banks and credit unions still have to comply. Sharp emphasized that state lawmakers should consider repealing the law.
“We appreciate their recognition that there is a problem,” Sharp said. “This law requires careful consideration, especially given the pending litigation and its potential outcomes.”
House Bill 742 passed the Senate and received approval in the House. Karr stressed that IRMA is committed to ensuring the law is not delayed further.
He said that the organization will urge lawmakers to renew their promise to stop swipe fees.