Retailers sue federal regulators in latest drama over Illinois’ credit card swipe fee law
Retail groups sued two federal regulators on Thursday, hoping to revive Illinois’ embattled efforts to ban certain credit card interchange fees, also known as “swipe fees.”
The suits mark the latest turn in a yearslong legal fight between retailers, which want to cut swipe fees, and financial institutions, which have challenged those efforts.
The two lawsuits were filed in U.S. District Court for the District of Columbia. They challenge rules issued by the Office of the Comptroller of the Currency and the National Credit Union Administration. Those rules led a federal judge in Illinois to permanently block the state law in June.
Banks and credit card companies charge retailers a fee each time a customer pays with a card. The fee is calculated on the total transaction, including sales taxes and tips. The 2024 law, passed by the General Assembly and signed by Gov. JB Pritzker, would bar those fees on the tax or tip portions of a customer’s purchase. It was intended to give retailers financial relief.
Several national and state groups are among the plaintiffs. They include the Illinois Retail Merchants Association, which has led public advocacy for the law, along with the National Retail Federation and the Illinois Restaurant Association.
Neither the OCC nor NCUA, nor Illinois Attorney General Kwame Raoul’s office, immediately responded to a request for comment Thursday.
As litigation continues, “swipe fees continue to cost retailers and therefore consumers,” Illinois Retail Merchants Association President and CEO Rob Karr said in a phone interview Thursday. “It undermines retailers’ ability to keep prices for consumers down.”
Financial institutions have fought the law for more than two years, a conflict that has played out in the statehouse, in federal courts, on the airwaves and in Washington since lawmakers and Pritzker enacted the ban.
In February, Chief Judge Virginia M. Kendall of the U.S. District Court for the Northern District of Illinois ruled that key provisions of the law could go into effect, a decision backed by retailers. Banks appealed.
But in April, the federal regulators moved to block the law, a decision that favored financial institutions. Kendall issued a permanent injunction in early June that stopped enforcement of the law for most types of financial institutions that would otherwise have been affected. At almost the exact same time, the General Assembly voted to delay implementation of the act until July 2027.
Both sides have since appealed in the 7th U.S. Circuit Court of Appeals, with arguments expected by the end of February, according to an order last month.
Financial institutions have long said eliminating swipe fees could cause “chaos” for consumers by changing a major part of the transaction process. Retailers say the credit card law will lower costs for businesses and consumers, and that arguments that the change will cause inconvenience are overblown.
Groups representing banks and credit unions who sued to block the Illinois law on Thursday said they were “disappointed but not surprised” by the new lawsuits and expected the court to reaffirm federal regulators’ actions.
“We appreciate the willingness of these (federal) agencies to protect consumers and businesses and defend the national payment system that helps drive the U.S. economy forward,” the groups said in a statement.
oolander@chicagotribune.com