WASHINGTON — Illinois Gov. J.B. Pritzker signed a bill delaying the implementation of a ban on interchange fees on taxes and tips, a measure that bank groups have strongly opposed since the state law was passed last year.
The measure, which was included in last year's state budget bill, would
The provision was originally a tradeoff between lawmakers and Illinois retailers, who had a separate tax exemption eliminated in a separate part of the same budget bill. Bank groups have said it
"In the coming months, we will urge the General Assembly to repeal this law in order to protect Illinois' local financial institutions, small businesses and consumers from a disruption to the unified global payments system," said Ben Jackson, executive vice president at the Illinois Bankers Association.
Bank trade and credit union groups, including the Illinois Bankers Association, the American Bankers Association, America's Credit Unions and the Illinois Credit Union League,
"Credit unions across Illinois applaud Governor Pritzker for his swift action in signing House Bill 742, extending the effective date of the Interchange Fee Prohibition Act," said Ashley Sharp, lead legislative counsel for the Illinois Credit Union League. "While litigation challenging the law proceeds, it is imperative to provide relief to credit unions, local banks, Main Street businesses and consumers throughout the state of Illinois — all who stand to be negatively impacted by this law."
Still, the underlying conflict at issue in the Illinois interchange law remains unresolved, and other states are considering similar rules. Pressure from those states could spill over into federal policy, where banks and payments groups have fought against interchange rules for years.
"Merchants are trying to create such chaos at the state level that Congress is forced to intervene with a federal regime to set credit card interchange rates," said Jaret Seiberg, a financial services analyst at Cowen. "It is why merchants do not need to succeed in every state. They just need to get the interchange limits implemented in one state."
Electronic Payments Coalition Executive Chair Richard Hunt in a statement called for Illinois to repeal the law in its entirety.
"This should be a red flag for every state legislature considering kowtowing to the corporate mega-stores — at the expense of state chartered financial institutions, their customers and small businesses — by upending our safe, secure, efficient global payment system," he said. "Congress, too, should take note of the dangers caused by passing legislation placing new mandates on our trusted payment systems without hearings, debate or review."
