By Olivia Olander and Jeremy Gorner
Chicago Tribune
(TNS)
CHICAGO — The federal government is looking to stop a controversial Illinois law banning certain credit card fees, a move that appears to favor financial institutions that have fought the state law in court for more than a year.
The Office of the Comptroller of the Currency, an independent bureau of the U.S. Department of the Treasury, plans to put out an “Order Preempting the Illinois Interchange Fee Prohibition Act,” according to a federal posting this week. The full text of the order wasn’t part of the posting.
Passed in 2024 and set to take effect this July, the state law bans certain so-called swipe fees, also known as interchange fees, on the tax and tip portions of customers’ bills, with a goal of lowering the amount that credit card companies can charge retailers.
Credit card companies and financial institutions currently charge retailers a fee when consumers use cards, based on the total transaction, including goods, taxes and tips. The law bans fees on the tax or tip portions of customers’ bills. Financial institutions have argued that implementation would be burdensome and costly, affecting not only their industry but potentially also small businesses and consumers.
A federal judge in February ruled key provisions of the first-in-the-nation law could go into effect, a decision that banks and credit unions quickly appealed, but that retailers who supported the legislation backed.
“This rushed announcement by the federal government to usurp Illinois law is unprecedented, prioritizing the bottom line of banks and credit card companies over meaningful relief for businesses and consumers,” Rob Karr, president and CEO of the Illinois Retail Merchants Association, said in a statement Wednesday. “While the office has failed to explain their reasoning or allow public review, it’s clear the goal is an end-run around the legal process after a judge recently upheld the law.”
Amid the litigation, lawmakers last year delayed the ban’s effective date, moving it from last July to July 2026.
The Democratic-led General Assembly passed the swipe-fee ban at the behest of retailers who opposed a separate tax hike on their businesses. Both measures were included in that year’s state budget. Since then, financial institutions in courtrooms, television ads and the media have argued it will cause chaos in transactions and the payment system.
Retailers say the credit card law will lower costs for businesses and consumers, and that arguments that the change will cause inconvenience are overblown.
“Banks, credit card companies and credit card processors are doing all they can to preserve an uncompetitive and unfair system, including spending millions of dollars on ads spreading falsehoods and threatening to cause chaos for consumers,” Karr said in his statement.
State Rep. Margaret Croke, a Chicago Democrat who has sponsored a bill to repeal the law, took a cautious, wait-and-see approach on the impact of the federal government’s notice specifically singling out Illinois’ law.
Croke said she wants to see whether any directive from Republican President Donald Trump’s administration would apply only to nationally chartered banks, or also to smaller community banks.
“With this federal government, I don’t know if that’s helpful if I don’t know if that’s hurtful,” said Croke, who won the Democratic nomination last month in the race for Illinois comptroller, an office responsible for paying the state’s bills and monitoring fiscal compliance.
Croke, who also chairs the House’s Financial Institutions and Licensing Committee, said her repeal legislation came in light of problems with the interchange fee law, which includes how the policy passed the Legislature a few years ago “without robust conversation.” She said she wants to see that implementation pushed back for another year.
“I still feel like members of the Legislature don’t fully understand the implications of interchange. So that’s just one part of that. And then now we’re dealing with the repercussions of it, and it’s starting to come up on us really quickly on July 1st,” she said.
State Sen. Mark Walker, an Arlington Heights Democrat who sponsored repeal legislation, echoed Croke’s cautious approach to the Trump administration’s announcement, while explaining how the current state law is not “workable.”
“I’d have to look at what the Feds actually did,” he said.
In a press conference earlier Wednesday, Ben Jackson of the Illinois Bankers Association said, given the law, some banks “are considering removing credit card offerings or other products and services that consumers and businesses in Illinois enjoy.” If the bill had been vetted two years ago, it wouldn’t have passed, he said, calling for a repeal.
— Gorner reported from Springfield.
Photo credit: PeopleImages/iStock
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©2026 Chicago Tribune. Visit chicagotribune.com. Distributed by Tribune Content Agency LLC.
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