Some of the nation’s leading financial trade groups sued the state of Illinois on Thursday in an attempt to block a state law from going into effect that would place new limits on financial firms’ ability to charge interchange fees.
The lawsuit, brought by the American Bankers Association, Illinois Bankers Association, America’s Credit Unions and the Illinois Credit Union League, targets the first-of-its-kind law passed in May. The Illinois reform didn’t ban or restrict swipe fees writ large, but it limited banks from charging interchange fees on tax and tip revenues.
That’s still a problem for the banking and credit union sectors. The trade groups argued in the U.S. District Court for the Northern District of Illinois that the law would “throw well-operating payment card systems into chaos” and “undermine the significant benefits, safety, and security that payment card systems provide to all participants.”
Read the 74-page filing here, which was submitted Thursday.
This case is an intense microcosm of a lobbying war banks and retailers have been fighting in Washington for a couple of years. Illinois Democratic Sen. Dick Durbin, the No. 2 Senate Democrat, has led the charge against swipe fees for years, and his latest effort with Sen. Roger Marshall (R-Kan.) would target credit card fees specifically.
Merchants have complained for decades that credit card companies, led by Visa and Mastercard, charge exorbitant fees to process payments. Financial firms reply that those fees help keep their payment systems secure and operational.
But while Congress hasn’t seen much movement on swipe fee legislation, Illinois is a different matter. The financial industry is concerned that if Illinois’ law is allowed to stand, other states could follow suit and cut into a lucrative source of profits in the payments sector on a national scale.
A key argument for the financial sector is that Illinois state law should be preempted by the National Bank Act, which theoretically prevents state governments from “significantly” interfering with a “national banks’ exercise of its powers.”
The law is set to take effect July 1, 2025 — unless, of course, a court steps in and blocks the implementation from moving forward.
Meanwhile in tax: Not even Iowa State Fair’s butter cow is safe from the 2025 tax fight. The Ways and Means Committee will host a field hearing in Des Moines, Iowa, today starting at 10 a.m. ET.
The Iowa State Fair is no stranger to politics, and this field hearing will be no different. Ways and Means Chair Jason Smith (R-Mo.) will use the hearing as a springboard to take on the tax positions of Vice President Kamala Harris. That’s something the GOP members of the House’s tax-writing committee haven’t had a chance to do since President Joe Biden dropped out of the 2024 election.
Ways and Means Republicans will hammer home the stakes of the 2025 tax fight, accusing Harris and other Democrats of wanting the Trump-era tax cuts to expire, a move that would raise taxes for a lot of folks. Democrats have their own ideas.
