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Court Shields Federal Credit Unions From Illinois Swipe Fee Law

A federal court ruling exempts federal credit unions from Illinois' swipe fee ban, creating new hurdles for retailers expecting transaction cost relief.

Retailers in Illinois are seeing the legal landscape shift regarding the state's controversial Interchange Fee Prohibition Act (IFPA). A U.S. District Court has ruled that federal credit unions are exempt from the law. This follows a similar ruling that protected national banks. The Illinois law originally aimed to stop banks and payment processors from charging swipe fees on the tax and tip portions of a transaction. For merchants, this ruling significantly complicates the rollout of the law, which was scheduled to take effect in July 2025. If you operate a business in Illinois, this means the 'savings' you expected from lower swipe fees may not apply to a large portion of your customers. Since federal credit unions and national banks are now shielded, the law would only apply to state-chartered institutions. This creates a two-tiered payment system. You might have to use different fee structures depending on which bank issued your customer's card. Most industry experts believe this makes the law nearly impossible to implement technically. The ruling is a win for the banking lobby, which argues that the Illinois law interferes with federal banking standards. For now, retailers should not count on swipe fee relief from transactions involving federal credit unions or major national banks.

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