Federal Ruling Gives Illinois Lawmakers Chance to Rethink Interchange Law
PORTLAND, Ore. (Jan. 13, 2025) — As members of the Illinois General Assembly reconvene for the 2025 legislative session, a recent federal court decision delaying implementation of the Illinois Interchange Fee Prohibition Act (IFPA) gives lawmakers an opportunity to revisit the legislation before it can cause significant disruption to the state’s payments ecosystem, according to the International Center for Law & Economics (ICLE).
In a Dec. 20, 2024 order, Judge Virginia Kendall of the U.S. District Court for the Northern District of Illinois partially granted a preliminary injunction in a lawsuit brought by the Illinois Bankers Association and other bank and credit union trade associations challenging the IFPA as preempted by the National Bank Act and other federal laws regulating depository institutions. The court has scheduled a Jan. 15 conference in the case.
The delay may allow lawmakers to rethink the approach taken by the IFPA, which was scheduled to take effect July 1, 2025, ICLE Senior Scholar Julian Morris noted. Morris is the author of a November 2024 ICLE white paper that examined the effect of laws like the IFPA, which would prevent payment-card issuers from retaining interchange fees on taxes and gratuities in Illinois.
“Implementation of such regulations is likely to be both costly and complex, potentially harming the very parties they aim to help,” Morris said. “Smaller merchants and lower-income consumers may bear the brunt of these regulatory changes, as the benefits would disproportionately favor large merchants while potentially increasing costs for smaller businesses operating on different fee structures.”
The full ICLE white paper can be downloaded here, as well as a “tl;dr” explainer here. To schedule an interview with Julian, contact ICLE Media and Communications Manager Elizabeth Lincicome at (919) 744-8087 pr [email protected].