A federal court in Illinois yesterday upheld an Illinois state law prohibiting swipe fees on taxes and tips.

The ruling comes after attorneys representing NACS, the Illinois Retail Merchants Association, National Retail Federation (NRF) and FMI (Food Industry Association) joined Illinois Attorney General Kwame Raoul in oral arguments last October asking that the swipe fee ban be upheld. The associations argued that since swipe fees are set by non-banks—Visa and Mastercard—the ban cannot be voided by federal law that preempts state law affecting nationally chartered banks.

The ruling stated:

“The Payment Card Networks built this ecosystem, and the Payment Card Networks set these fees. To claim that the IFPA Interchange Fee Provision impermissibly interferes with the powers set out in 12 C.F.R. § 7.4002—which ‘should be arrived at by each bank on a competitive basis and not on the basis of any agreement’—does not add up in the face of that reality. The thrust of 12 C.F.R. § 7.4002 is not to protect fees centrally established by a third-party company. … Accordingly, Illinois Bankers request for a permanent injunction finding that the IFPA’s Interchange Fee Limitation violates the federal rights of national banks under the Barnett Bank standard—and therefore also federal savings associations—is denied.”

“We are pleased that the Illinois court made clear that the state’s prohibition on charging interchange fees on the tax and tip amounts of transactions could move forward,” said NACS General Counsel Doug Kantor. “The court recognized that credit card networks setting the fees for banks so that those fees were not competitive is a problem that allowed the state to regulate them. Visa and Mastercard could not justify hiding behind banks on a legal technicality when banks hide behind the cartel-style price-setting of Visa and Mastercard in the marketplace every day. We look forward to the law going into effect so that Illinois businesses and consumers begin to see some relief from out-of-control swipe fees."

The litigation over the Illinois law comes as Congress is considering the Credit Card Competition Act (CCCA) to address swipe fees, which hit a record $187.2 billion in 2024 and drive up prices for the average family by nearly $1,200 a year.

NACS will continue to advocate for the passage of the CCCA. Don’t miss your opportunity to make sure your voice is heard. Join NACS for the upcoming NACS Day on the Hill, March 17-18 in Washington, D.C. You can also send emails to your lawmakers voicing your support for the CCCA through our Call to Action portal. The more industry voices that speak out on the issue, the higher the likelihood of getting a vote and winning that vote. Your participation matters and makes all the difference.