Merchants sue feds over Illinois card fee law

Retailers and service providers in Illinois are currently caught in a legal tug-of-war over how credit card fees are calculated. A group of merchant trade associations is suing federal regulators to protect the Illinois Interchange Fee Prohibition Act (IFPA). This state law, which is the first of its kind in the U.S., bans banks and card processors from charging swipe fees on the tax and tip portions of a transaction. For a business owner, this would mean keeping more of every sale by only paying processing fees on the actual price of the goods or services sold. The conflict arose after federal banking regulators (the OCC and FDIC) issued letters suggesting that the state law is preempted by federal rules, claiming it would be too difficult for national banks to implement. Merchants are fighting back, arguing that the regulators are overstepping their bounds to protect big bank profits at the expense of small businesses. If the law survives this legal challenge, it could set a massive precedent. It would force a total overhaul of how Point-of-Sale (POS) systems handle transactions. While it promises lower overhead for retailers, the short-term reality is a period of intense regulatory uncertainty as the courts decide if the state has the right to dictate fee structures to national lenders.

Source: Payments Dive

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