Banking and credit union trade associations are challenging a federal court decision that upheld the nation’s first state law prohibiting swipe fees on sales tax, excise tax and gratuities, reported OPIS this week.

The court decision marked a tremendous victory for the retail community who for years have advocated that swipe fees should be prohibited from the tax portion of the transaction.

“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 Illinois Interchange Fee Prohibition Act passed in 2024 but was immediately challenged by the banking industry. After a favorable ruling February 10 from the U.S. District Court for the Northern District of Illinois, the law is now set to take effect in July. “The Illinois ban could be copied in other states,” OPIS wrote. More than a dozen states have considered similar legislation.

According to the OPIS report, banking industry trade groups said they would not “let the law stand.” In the district court, they argued the National Banking Act preempts the Illinois law.

But the court disagreed, saying that card networks, not banks, set the 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. The CCCA was reintroduced in Congress in January following President Trump’s endorsement of the bill.

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.