Feds move to block Illinois credit card swipe fee law

Key Points:

• The Office of the Comptroller of the Currency (OCC) has issued an order preempting Illinois’ law banning certain credit card interchange fees, favoring national banks but potentially leaving state-chartered banks and credit unions exposed to compliance costs.
• The Illinois law, passed in 2024, prohibits credit card companies from charging fees on the tax and tip portions of customer bills, aiming to reduce costs for retailers; financial institutions argue the law is burdensome and costly.
• The federal preemption applies only to national banks, prompting calls from lawmakers and industry groups for the Illinois General Assembly to act to prevent uneven application and possibly delay or repeal the law before its July 1 effective date.
• Retailers support the law, asserting it will lower business costs, while banking groups warn it could disrupt payment systems and lead some banks to cut credit card services in Illinois.
• Legal battles continue, with a federal judge allowing key parts of the law to proceed and banks appealing; stakeholders are expected to hold further discussions in Springfield to address the law’s future.