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Merchants sue feds over Illinois card fee law

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Merchants sue feds over Illinois card fee law

Trade groups filed lawsuits against bank and credit union regulators over a preemption of a state law that bans swipe fees for taxes and tips.

Spokespeople for the OCC and NCUA did not immediately respond Thursday to requests for comment on the lawsuits.

Illinois Gov. JB Pritzker signed the state’s Interchange Fee Prohibition Act in June 2024 and it’s been the subject of litigation ever since. Illinois was the first state to enact such legislation to eliminate credit and debit card fees on the tax and tip portions of consumers’ tabs. Those fees are paid by merchants as revenue for the banks that issue the cards.

The law triggered an August 2024 lawsuit from associations representing banks and credit unions.

The lawsuit against U.S. regulators is a new legal front in litigation surrounding the Illinois law. Banks and credit unions had challenged the law in federal court in Chicago, a case that has now shifted to a federal appeals court after U.S. District Judge Virginia Kendall imposed an injunction on some parts of the law due to the OCC and NCUA preemptions.

Illinois and the bank associations are both appealing Kendall’s ruling, with arguments in that case scheduled for late January. The Illinois law covers debit and credit card transactions on the Visa and Mastercard networks, which handle “over 80%” of all card transactions, according to the merchants’ lawsuits.

S. Court of Appeals was considering an appeal filed by the plaintiffs after Kendall initially upheld some parts of the law in February.


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