Fate of Illinois’ first-in-the-nation credit card ‘swipe fee’ ban awaits
judge’s ruling
[October 24, 2025]
By Hannah Meisel
CHICAGO — A law that would make Illinois the first jurisdiction in the
world to ban financial institutions from charging “interchange fees” on
the tax and tip portions of debit and credit card transactions finally
got its day in court this week nearly 18 months after its passage.
U.S. District Judge Virginia Kendall’s ruling — expected in the coming
weeks — will determine the legality of the “Interchange Fee Prohibition
Act,” which was folded into Illinois’ Fiscal Year 2025 budget package in
May 2024 by Democrats who control the General Assembly.
The move was championed by the Illinois Retail Merchants Association,
which positioned the law as pro-consumer, as retailers often pass the
fees onto customers. But other business groups, which are typically
aligned with IRMA, balked at the idea, claiming it would cause “credit
card chaos.”
Nearly a year ago, Kendall issued a preliminary injunction preventing
the law from applying to federally chartered banks, later extending it
to out-of-state banks that operate in Illinois, after banks and credit
unions sued over the law in August 2024.
But credit unions, Illinois-based banks and credit card companies are
not covered by the judge’s ruling, so lawmakers this past spring delayed
the IFPA’s effective date from July 1, 2025, for another year, giving
the case time to play out in court.
Anticipation for the ruling goes beyond just the parties in the case; in
the last year, 22 other state legislatures have considered — and
rejected — similar bans on credit card swipe fees. But Illinois Bankers
Association Executive Vice President Ben Jackson told reporters
Wednesday that the legal fight isn’t the only avenue financial
institutions are counting on.
“Our legislative allies — and there are many of them … — are really very
eager to move forward with a repeal effort this spring,” he said.
Oral arguments
The judge heard two hours of highly technical arguments Wednesday as she
prepares to rule on the financial institutions’ motion for summary
judgment. In their original lawsuit, plaintiffs argued the law would
“upend the intricate and carefully calibrated global systems for debit
and credit card purchases.”
But Wednesday’s arguments focused more on questions of law, including
whether the state of Illinois exceeded its authority by adopting the
IFPA.
Charlotte Taylor, an attorney representing the Illinois Bankers
Association, said financial institutions would suffer significant
reductions in the amount of revenue received from Illinois retailers,
restaurants and other establishments in the hospitality industry. She
argued that “interchange is compensation because they are taking on the
risk of fraud.”
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The Dirksen Federal Courthouse is pictured in Chicago. (Capitol News
Illinois photo by Hannah Meisel)
“I don’t know of an agency relationship where the agent says, ‘Here’s
what you get paid, here’s what it’s gonna be, take it or leave it,’”
Taylor argued.
But Darren Kinkead, an lawyer in Illinois Attorney General Kwame Raoul’s
office, argued banks are “still getting plenty of interchange fees.”
“They are not doing any work for which they are not being compensated,”
he said.
Furthermore, Kinkead argued that the amount of interchange fees
financial institutions would be able to collect would only be reduced by
about 9 to 10%.
“Nine percent of anything is not extreme,” he said. “Like we’ve
discussed before, 91% is still an A.”
But Taylor rebuffed Kinkead’s argument.
“Imagine you’re making a 5% profit, which is a reasonable profit margin
for a business, then suddenly 10% of that profit is taken away,” she
said. “Now you’re operating at a 5% loss.”
Mithun Mansinghani, an attorney representing the Illinois Retail
Merchants Association, circled back to opponents’ claims of “credit card
chaos” in his “friend-of-the-court” arguments Wednesday.
“These card networks — they operate in like 200 different countries,” he
said. “They have to comply with the laws of those 200 different
countries and different states.”
IRMA requested the interchange fee ban during May 2024 budget
negotiations to mitigate the effects of Gov. JB Pritzker’s push to cap a
monthly sales tax deduction claimed by retailers at $1,000 to generate
$101 million annually for state coffers.
Capitol News Illinois is
a nonprofit, nonpartisan news service that distributes state government
coverage to hundreds of news outlets statewide. It is funded primarily
by the Illinois Press Foundation and the Robert R. McCormick Foundation.
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