Illinois bans card fees on taxes and tips despite fierce industry backlash
A federal judge has upheld Illinois's Interchange Fee Prohibition Act, a law that stops credit and debit card companies from charging processing fees on tax and tip portions of transactions. The decision comes despite opposition from banking groups and payment processors, who warn of potential disruptions. The law is now set to take effect on 1 July 2025 as planned.
The ruling has drawn strong reactions from both supporters and critics. The Illinois Retail Merchants Association, led by President Rob Karr, argues that the law will ease financial pressure on small businesses. Karr dismissed claims of chaos, pointing out that card companies and processors have had years to prepare for the change.
Opponents, however, remain unconvinced. Ben Jackson of the Illinois Bankers Association warned that the law could slow down transactions and harm commerce. Richard Hunt, Executive Chairman of the Electronic Payments Coalition, echoed these concerns, predicting confusion for small businesses and consumers.
Legal challenges are far from over. Plaintiffs, including the Illinois Credit Union League and the American Bankers Association, have already announced plans to appeal the decision to the Seventh Circuit Court of Appeals. Meanwhile, U.S. Senator Dick Durbin has repeatedly backed the law, filing amicus briefs in both 2024 and 2025.
The law will move forward on 1 July 2025 unless the appeals court intervenes. If implemented, it will remove processing fees on tax and tip amounts for all card transactions in Illinois. Businesses, banks, and consumers will soon see how the changes play out in practice.
