Judge adds credit unions to Illinois swipe fee injunction

Retailers and service providers operating in Illinois face continued uncertainty over the state’s Landmark Interchange Fee Prohibition Act. A federal judge recently expanded an injunction to include credit unions, meaning they—alongside national and state banks—do not have to comply with the law for now. The Illinois law originally intended to stop banks and payment processors from charging swipe fees on the tax and tip portions of a transaction. For a business owner, this would have meant lower processing costs but a massive technical headache for point-of-sale systems. The judge’s decision is based on the concept of 'preemption.' Federal regulators, including the National Credit Union Administration, argue that state laws cannot dictate how federal financial institutions handle their core business activities. Because credit unions are now shielded by the same injunction protecting banks, the law is effectively toothless while the legal battle continues. Retailers should not expect any changes to their processing statements or fee structures in Illinois in the immediate future. If you were planning to update your POS system to track tax-exempt interchange fees, you should put those plans on hold. The banking industry is fighting this law aggressively, and the courts are currently siding with the lenders.

Source: American Banker — Top News

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