ICLE Comments to the OCC on Preempting the Illinois Interchange Fee Prohibition Act
I. Introduction
The International Center for Law & Economics (ICLE) submits these comments in response to two actions by the Office of the Comptroller of the Currency (OCC). The first is the OCC’s interim final rule (Rule), which clarifies that national banks’ authority to charge noninterest fees includes the power to obtain interchange fees from credit- and debit-card operations, including fees set by or in consultation with third parties.[1] The second is the OCC’s interim final order (Order), which concludes that federal law preempts the Illinois Interchange Fee Prohibition Act (IFPA), which restricts interchange fees on the tax and gratuity portions of payment-card transactions and limits the use of payment-card transaction data.[2]
ICLE is a nonprofit, nonpartisan research center that applies law & economics to public-policy questions. Its work promotes sound economic analysis and consumer welfare. ICLE scholars have written extensively on payment-card markets, interchange fees, and related regulation. These comments draw substantially from ICLE’s white paper, Regulating State Interchange Fees: Evaluating the Likely Effects of the IFPA,[3] and related research.[4]
The IFPA is a novel state law that, absent preemption or a stay, would prohibit payment-card issuers, networks, and processors from charging interchange fees on transaction amounts attributable to gratuities or state and local sales taxes. Although framed as a measure to reduce merchant costs, the IFPA would create economic and legal problems that far outweigh its asserted benefits.
The law would impose a cumbersome two-track compliance regime. One pathway would require merchants to transmit tax and gratuity data in real time during payment authorization. The other would allow merchants to seek rebates for interchange fees collected on exempted amounts. Both approaches would impose substantial technological, operational, and compliance burdens on payment networks, processors, merchants, and financial institutions, while adding inefficiency to the payments system.
Interchange fees are not merely transaction costs. They help payment-card networks balance the two-sided market connecting merchants and consumers. Interchange revenue funds fraud prevention, payment security, rewards programs, insurance benefits, and payment-system innovation. Prohibiting interchange fees on taxes and gratuities would disrupt that balance and reduce issuer revenue. Financial institutions would likely respond by reducing rewards, raising account or card fees, increasing borrowing costs, or some combination of the three. Experience with interchange-fee regulation in the United States under the Durbin amendment, as well as in the European Union and Australia, suggests such interventions often reduce consumer benefits without producing corresponding consumer price reductions. The IFPA also would shift a substantial share of its costs to consumers outside Illinois, giving the law significant extraterritorial effects.
Those effects would grow if other states adopted similar laws. The IFPA effectively requires national payment systems to accommodate Illinois-specific rules, forcing costly and inefficient nationwide adjustments. Colorado has passed similar legislation, pending the governor’s signature.[5] Four other states—Delaware, Oklahoma, Pennsylvania, and Rhode Island—have advanced comparable bills, while 11 additional jurisdictions have active proposals.[6] This patchwork would fragment the national payments system, increase transaction costs, reduce innovation, and diminish efficiency. The problem is especially acute because states have proposed materially different exemptions and compliance mechanisms. As the OCC recognized in the Order, these laws also raise substantial constitutional and federal-preemption concerns. National banks and federal savings associations have challenged the IFPA as preempted by the National Bank Act (NBA) and the Home Owners’ Loan Act (HOLA).
The federal district court initially granted a preliminary injunction barring enforcement of the IFPA against national banks and federal savings associations after concluding the law was likely preempted by the NBA and HOLA.[7] The same court later held at summary judgment that those statutes did not preempt the IFPA’s interchange-fee provisions, although it found the law’s data-use restrictions preempted.[8] After the OCC issued the Rule and Order, the 7th U.S. Circuit Court of Appeals vacated the district court’s judgment and remanded the case for further proceedings.[9]
Ultimately, the IFPA’s narrow benefits for some merchants would come at the expense of broader harms to consumers, financial institutions, and the payments ecosystem. If replicated nationally, such laws could undermine the efficiency and uniformity of the integrated national payments system on which modern commerce depends. The OCC correctly concluded that national banks may charge interchange fees and other noninterest charges necessary to operate in modern payment markets. The OCC also correctly recognized that payment networks may establish such fees because they perform an essential coordinating function within the payment-card ecosystem. The OCC likewise properly concluded that federal law preempts the IFPA as applied to national banks and federal savings associations. Sound law & economics principles further support extending that preemption to all participants involved in the interchange-fee process.
II. Electronic Payments, Interchange Fees, and Two-Sided Markets
Electronic payments are indispensable to modern commerce. During the COVID-19 pandemic, they helped sustain the U.S. and global economies as cash use and face-to-face transactions fell sharply.[10] Studies show that payment cards—whether physical cards or mobile-wallet applications—offer substantial advantages over cash for most transactions.[11] Consumers benefit from greater convenience, stronger fraud protection, short-term liquidity through interest-free grace periods, and, in most cases, zero liability for fraud. Many cards also offer purchase protection, travel insurance, cashback rewards, airline miles, hotel points, and other benefits. These advantages help explain why most consumers prefer cards over cash or checks (Figure 1).
FIGURE 1: Payment-Instrument Share as Proportion of Number of Payments
SOURCE: Federal Reserve Board [12]
Merchants also benefit from electronic payments. Payment cards generally speed checkout, increase sales, and reduce theft and fraud risks associated with cash.[13] When Chicago-based quick-service chain Epic Burger went cashless in 2017, founder David Friedman cited improved speed, safety, and fewer counting errors.[14] Mercedes-Benz Stadium in Atlanta likewise reported faster transaction times, higher per-capita spending, and lower operating costs after going cashless in 2018.[15] Restaurants and sports venues in Illinois and nationwide have followed suit.[16]
Payment systems work only when both consumers and merchants participate. That participation depends on trust. Payment networks, issuing banks, acquiring banks, and payment processors invest billions of dollars in fraud prevention, cybersecurity, infrastructure, and maintenance to sustain that trust.[17] Consumers, meanwhile, use payment cards only when they see enough value from security, convenience, insurance, rewards, and related benefits. Issuing banks recover much of the cost of providing those benefits through interchange fees.[18]
Interchange fees remain widely misunderstood. Commentators often describe them simply as “transaction costs.”[19] That characterization is incomplete. Interchange fees do cover operating costs, including fraud prevention and network maintenance. But they also transfer value from merchants to consumers by funding cardholder benefits, such as rewards, purchase protection, and short-term credit.
All payment systems impose costs.[20] Cash is expensive to print, transport, secure, and process, though many of those costs remain hidden because governments subsidize currency production and distribution.[21] Checks impose costs and risks as well, including fraud, processing delays, and nonpayment. Merchants also benefit from legal rules requiring checks to clear at par, which shifts some costs to consumers and financial institutions.[22] More broadly, no payment system survives unless both merchants and consumers perceive net benefits from using it.[23] More broadly, no payment system survives unless both merchants and consumers see net benefits from using it. Cost allocation may differ across payment systems, but continued market adoption shows that both sides of the transaction generally benefit.
Electronic payments differ from cash and checks mainly because the costs of those older systems are often obscured by subsidies or legal rules that shift costs away from merchants. There is therefore no economic basis for exempting taxes or gratuities from interchange fees, just as there would be no basis for exempting portions of cash or check transactions from the costs of those payment systems. The visibility of interchange fees does not justify selectively shifting payment-system costs away from merchants.
Economists call these transfers “cross-side subsidies” because one side of a two-sided market subsidizes participation on the other.[24] Such arrangements are common. Advertisers subsidize newspapers, search engines, smartphone applications, and large language models. The economics literature has long recognized the importance of cross-side subsidies, and the U.S. Supreme Court has recognized their central role in payment-card markets:
Sometimes indirect network effects require two-sided platforms to charge one side much more than the other. For two-sided platforms, “’the [relative] price structure matters, and platforms must design it so as to bring both sides on board.’” The optimal price might require charging the side with more elastic demand a below-cost (or even negative) price. With credit cards, for example, networks often charge cardholders a lower fee than merchants because cardholders are more price sensitive. In fact, the network might well lose money on the cardholder side by offering rewards such as cash back, airline miles, or gift cards. The network can do this because increasing the number of cardholders increases the value of accepting the card to merchants and, thus, increases the number of merchants who accept it. Networks can then charge those merchants a fee for every transaction (typically a percentage of the purchase price). Striking the optimal balance of the prices charged on each side of the platform is essential for two-sided platforms to maximize the value of their services and to compete with their rivals.[25]
The Supreme Court’s discussion concerned American Express, a “3-party” payment-card network that combines network operations, card issuance, and acquiring functions in one firm. By contrast, the IFPA arbitrarily targets “4-party” networks, in which network operations, issuing and acquiring are each undertaken by distinct entities. Only 4-party systems use interchange fees because the issuing and acquiring institutions in those systems are distinct.
III. The Economic Effects of the IFPA
Although the Illinois Interchange Fee Prohibition Act (IFPA) is unusual in exempting only portions of interchange fees, many jurisdictions have imposed interchange-fee caps and related regulations. Those experiences offer useful lessons about the IFPA’s likely effects. The Durbin amendment to the Dodd-Frank Act is especially instructive.
Before the Durbin amendment, debit-card interchange fees helped issuing banks fund consumer benefits such as debit-card rewards and free checking accounts with low minimum-balance requirements. After the Federal Reserve implemented Regulation II, many banks reduced or eliminated those benefits.
Empirical studies by Federal Reserve economists found that Regulation II’s interchange-fee caps led covered banks to raise account fees, increase minimum-balance requirements, reduce access to free checking, and eliminate debit-card rewards.[26] Those changes disproportionately harmed lower-income households and increased the number of unbanked and underbanked consumers.[27] At the same time, there is little evidence that merchants passed their interchange-fee savings through to consumers in the form of lower retail prices.[28]
The same economic logic applies to the IFPA. The law restricts interchange fees not only on sales taxes, but also on gratuities. It applies to credit cards, debit cards, and general-use prepaid cards. It also reaches broadly across the payments ecosystem, covering issuers, payment-card networks, acquiring banks, and processors. In effect, every participant in the payment chain is prohibited from “charging or receiving” interchange fees on sales taxes and gratuities.
Compliance would require substantial technological and operational changes. Issuers and payment networks would need to upgrade information-technology systems and transaction-processing software to identify taxes and gratuities, modify authorization systems, and implement tracking or rebate mechanisms for post-transaction adjustments.[29] At the same time, the IFPA appears not to apply to 3-party networks such as American Express and Discover because those systems do not rely on interchange fees. As such, the IFPA is economically arbitrary and effectively preferences 3-party networks over 4-party networks for no good reason.
Implementing the IFPA would require far more than simply “turning off” interchange fees on taxes and tips. It would require systemwide changes to the nation’s electronic-payments infrastructure. Payment-card networks and processors would need to revise transaction-message formats and alter the algorithms used to calculate interchange fees for Illinois transactions. At minimum, compliance would require:
- Reliably identifying Illinois sales taxes and gratuities, including precise amounts that vary by product type and locality;
- Modifying authorization and settlement-message formats to transmit that information;
- Altering clearing and settlement systems to ensure interchange fees apply only to permitted transaction amounts; and
- Maintaining records and dispute-resolution systems for merchants seeking retroactive reimbursement of interchange fees on taxes and gratuities.
Even while holding at summary judgment that the IFPA’s interchange-fee provisions were not preempted, the district court recognized the law’s substantial operational complexity. The court noted that compliance would likely require technical capabilities that do “not currently exist, but could possibly exist through additional investment.”[30] It likewise described the resulting compliance costs as “undeniable” and even “staggering.”[31] The OCC estimates those costs could exceed $300 million annually.[32]
Those compliance costs alone would be substantial. More significant still would be the reduction in interchange-fee revenue used to fund consumer rewards and support card issuance. Eliminating interchange fees on taxes and gratuities could reduce issuer revenue by roughly 0.1% on transactions involving Illinois merchants.[33] For large issuers, that could amount to tens of millions of dollars annually.[34] Issuers—both inside and outside Illinois—would likely respond in one or more of several ways.
A. Reduced Cardholder Rewards and Benefits
Banks would likely respond first by scaling back cardholder rewards and benefits. Credit-card issuers fund rewards programs primarily through interchange fees. If interchange-fee revenue from Illinois transactions declines by 10% or more, issuers will have less revenue to support existing rewards commitments.
Experience elsewhere strongly suggests this outcome is likely. Following interchange-fee price controls in the United States under the Durbin amendment, in Australia under regulations adopted by the Reserve Bank of Australia, and in the European Union under the Interchange Fee Regulation, issuers reduced the generosity of rewards programs.[35] In many cases, those reductions were widespread.
Issuers could also reduce other benefits funded through interchange fees, including travel insurance, purchase protections, and related cardholder services. Australian and European issuers adopted similar measures after interchange-fee regulation in those jurisdictions.[36] If Illinois remains the only state to impose this restriction, national issuers may be less likely to reduce benefits nationwide. Local Illinois banks and credit unions, by contrast, may have fewer alternatives because their customer bases are concentrated in the state. In practice, any nationwide reduction in benefits would force out-of-state cardholders to subsidize the Illinois operations of large merchants.
Issuers could instead create Illinois-specific rewards programs to offset the revenue loss. But doing so would require amendments to nearly all cardholder agreements, as well as agreements with rewards partners such as airlines and hotels. State-specific programs would also complicate customer communications and increase operational complexity.
A more likely response would be modest nationwide reductions in rewards. For example, a bank offering 2% cashback might reduce rewards to 1.95%, or slightly devalue points across its portfolio. Economically, reducing rewards functions as a price increase for consumers. Research consistently shows that consumers bear most of the costs of interchange-fee restrictions, while merchants pass through little, if any, savings through lower retail prices. Once compliance costs are included—including the costs of adapting to Illinois’ law and potentially inconsistent copycat laws in other states or municipalities—it is not clear merchants would realize net savings at all.[37]
Nationwide adjustments would still require amendments to cardholder and partner agreements, but they would be easier to administer than state-specific programs. They would also spread costs across cardholders nationwide. In effect, Illinois policy would impose costs on consumers outside Illinois, forcing out-of-state cardholders to subsidize the Illinois operations of large merchants.
The likelihood of reduced rewards and benefits would rise substantially if additional states adopted similar legislation. Even if Illinois remains unique, issuers may still reduce benefits for Illinois-based customers or for transaction categories with large tax components, such as gasoline purchases that include substantial fuel taxes.
B. Higher Card and Account Fees
Issuers have often responded to interchange-fee price controls by introducing or increasing cardholder fees. In Australia, for example, banks increased average annual credit-card fees by roughly 50% after interchange-fee regulation.[38] Illinois consumers could face similar outcomes. Cards that currently carry no annual fee could begin charging one, while cards with more generous rewards programs could become more expensive.
Debit cards and associated checking accounts could also become more costly. That is precisely what happened after the Durbin amendment. Some covered banks initially proposed monthly debit-card usage fees to offset lost interchange revenue. After public backlash, many instead increased monthly account fees and raised minimum-balance requirements for free checking accounts.[39]
Those changes disproportionately burden lower-income consumers, who are less likely to maintain large balances and more likely to rely on low-cost banking products. Prior experience with interchange-fee regulation shows that reduced interchange revenue can reduce access to affordable banking services and increase the number of unbanked or underbanked households.
Because nationally chartered banks and out-of-state financial institutions issue a large share of debit and credit cards used in Illinois, the IFPA’s effects would likely extend well beyond Illinois residents. If banks increase fees across broader customer bases, consumers nationwide would bear part of the cost of Illinois’ interchange-fee restrictions. The IFPA would therefore create substantial extraterritorial effects, particularly if issuers adopt nationwide pricing changes to simplify administration and compliance.
C. Higher Borrowing Costs
Issuers could also respond by increasing borrowing costs, including annual percentage rates (APRs). After the European Union adopted the Interchange Fee Regulation—which capped interchange fees at 0.2% for debit transactions and 0.3% for credit transactions—the spread between the European Central Bank’s base rate and credit-card APRs widened.[40]
The IFPA alone might not produce a measurable increase in APRs. Even so, reduced interchange revenue could place upward pressure on interest rates, particularly for higher-risk borrowers. Consumers would ultimately bear those higher borrowing costs.
If issuers apply those pricing changes across broader customer portfolios rather than limiting them to Illinois accounts, the effects would extend beyond Illinois. As with reduced rewards and higher account fees, the IFPA’s costs would likely fall in part on out-of-state consumers.
D. Fragmentation of the National Payments System
Payment-card networks currently operate under largely uniform nationwide interchange-fee schedules. The IFPA would undermine that system. If other states adopt similar laws exempting sales taxes, gratuities, or other transaction components from interchange fees, payment networks would likely need to create multiple state-specific interchange regimes.
That fragmentation would increase operational complexity, compliance costs, and administrative burdens. Networks and processors would need to track varying state requirements, identify covered transactions in real time, and apply different interchange calculations depending on jurisdiction and transaction type.
As more states adopt divergent rules, the interchange system would become harder to administer. The resulting patchwork could undermine the efficiency and uniformity of the national payments system and, at sufficient scale, render the existing nationwide interchange framework effectively unworkable.
E. Nationwide Increases in Interchange Fees
Card networks might also respond by increasing default multilateral interchange-fee schedules nationwide to offset revenue losses from Illinois transactions. In practice, that would likely mean modest across-the-board increases in interchange fees throughout the country.
Such an approach would shift costs from Illinois merchants to merchants and consumers in other states. Out-of-state merchants would face higher interchange fees, while consumers outside Illinois could bear corresponding costs through higher retail prices, reduced rewards, or other pricing adjustments. The IFPA would therefore create another form of extraterritorial cost shifting, spreading costs nationwide to subsidize Illinois-based merchants.
IV. The IFPA Interferes with Federally Authorized Banking Powers
At the preliminary-injunction stage, the district court applied the Barnett Bank standard and found that the IFPA’s Interchange Fee Provision “significantly interferes” with national banks’ and federal savings associations’ federally authorized power to set interchange fees.[41] At summary judgment, however, the court reversed course for one principal reason: payment-card networks, rather than banks themselves, formally set the fees.[42]
That distinction collapses once the underlying economics are understood. As the court acknowledged, payment-card networks set interchange fees on behalf of issuing banks.[43] Those fees allow issuers to recover transaction-processing costs and fund consumer benefits such as rewards programs and checking-account services.
By limiting which portions of a transaction may carry interchange fees, the IFPA effectively imposes a price control on a fee structure that networks continuously calibrate to balance merchants and consumers. Disrupting that balance reduces the value of payment cards to consumers, which reduces usage and, in turn, diminishes value to merchants. The result harms both sides of the platform and materially interferes with national banks’ and federal savings associations’ exercise of their federally authorized powers.
The OCC is therefore correct that the IFPA’s Interchange Fee Provision is preempted as applied to national banks and federal savings associations.[44] The OCC is likewise correct to follow the district court’s conclusion that the IFPA’s Data Use Provision is preempted.
The same logic extends further. As the district court initially recognized, the IFPA should also be preempted as applied to out-of-state state banks because federal law grants them the same operational powers as national banks.[45] The same reasoning applies to the broader set of participants whose activities are inseparable from those banking powers, including payment networks and other payment processors.
As the district court explained in addressing the Data Use Provision:
Both parties admit that under the current system, if the Issuer associated with a transaction is exempt from the IFPA with respect to a transaction, then—to give effect to the Issuer’s exemption—other participants in the payment card ecosystem would need relief from the requirements of the IFPA for purposes of that transaction, though the Attorney General notes that said result may not be necessary were the global payment card ecosystem structured a different way.[46]
Applying “longstanding principles of equity,” the court concluded that the “Data Usage Limitation is so tied up in the federal entities’ powers that the preemptive effect must run to the Payment Card Networks and others involved in the payment process.”[47]
That reasoning accords with multisided-platform economics and applies equally to the IFPA’s Interchange Fee Provision. Payment-card networks operate integrated systems that establish interchange fees, participation requirements, authorization protocols, clearing and settlement rules, and liability standards. Networks connect merchants and cardholders through issuing banks, acquiring banks, and processors, while transmitting the information needed to complete transactions. Issuing banks, in turn, use interchange-fee revenue to process payments and fund services for cardholders and deposit customers.
Payment-card networks are therefore integrated platforms, not isolated contracts among merchants, banks, and processors. The OCC’s Rule clarifies this point. Interchange fees are the pricing mechanism that holds the system together. Exempting taxes and gratuities from interchange fees would alter the balance between merchants and consumers, shift costs to consumers, and force operational changes across a nationwide—and indeed global—payments network.
That reality bears directly on preemption. A law that materially alters how issuing banks recover costs and fund cardholder services substantially interferes with federally authorized banking powers, even if the law formally targets payment networks or transaction components rather than banks directly. For the same reason, equitable relief cannot stop with issuing banks alone. Because the payment-card system operates as a coordinated platform, compliance obligations imposed on one participant necessarily spill over to networks, processors, and other participants. Partial injunctions therefore cannot fully remedy the interference.
The IFPA’s Interchange Fee Provision should therefore be preempted and enjoined as applied to all participants in the interchange-fee process who are connected to federally regulated banks, including not only the banks themselves but also the networks and payment processors.
V. Preemption Would Avoid a Fragmented Regulatory Patchwork
The OCC correctly recognized that, absent preemption, the IFPA and similar state laws would create a fragmented and increasingly unworkable regulatory patchwork.[48] Multiple states have already followed Illinois by proposing or adopting nonuniform interchange-fee restrictions that apply to different institutions, transaction components, and fee categories.
Colorado’s law illustrates the problem. Unlike the IFPA, it applies only to issuers with more than $60 billion in assets, exempts sales taxes but not gratuities, applies to payment-card networks rather than issuers directly, and caps fees associated with charitable donations.[49] Other states have proposed exemptions for local tourism taxes, hotel-occupancy taxes, resort fees, and similar charges.
As Table 1 shows, the resulting patchwork is already substantial:
TABLE 1: Active or Pending Bills/Current-Session Proposals[50]
The IFPA’s inclusion of gratuities underscores the absence of any limiting principle. Taxes at least involve government levies that merchants collect and remit. Tips do not. Gratuities are voluntary payments from customers to service workers and function economically as wages. There is no meaningful economic distinction between interchange fees applied to wages embedded in the listed price of a meal or hotel room and interchange fees applied to tips paid through the same card transaction.
Illinois law still allows merchants to retain a limited sales-tax collection allowance for remitting taxes. There is no comparable state allowance or subsidy for processing gratuities. Including tips therefore suggests the IFPA’s objective is not merely to align interchange fees with government functions, but to impose broader price controls on payment-card processing fees. In practice, exempting gratuities transfers costs from merchants to issuing banks and consumers.
Once states begin carving selected transaction components out of interchange fees, there is little reason the process would stop with taxes and tips. Colorado already imposes restrictions tied to charitable contributions. Other politically influential industries could seek exemptions for food, gasoline, medical care, public transportation, childcare, vehicle repairs, or electric-vehicle charging. Legislatures could face constant pressure to create narrow and inconsistent exemptions based on political influence and public sentiment.
That logic quickly spirals in on itself. If merchants selling goods on consignment do not retain the full purchase price, should interchange fees apply only to their markup? If a merchant collects government-imposed licensing or registration fees, should those amounts also be exempt? As carveouts multiply, the operational complexity of calculating interchange fees would increase dramatically.
The rapid proliferation of nonuniform state proposals demonstrates why federal preemption is necessary. The National Bank Act and Home Owners’ Loan Act were designed to prevent states from imposing inconsistent regulatory obligations on nationally integrated banking and payments systems. Without preemption, interchange-fee regulation would become increasingly fragmented, politically driven, and economically disruptive.
VI. Conclusion
The OCC correctly concluded that the IFPA is preempted as applied to entities subject to OCC supervision. It also correctly clarified that, when payment-card networks set interchange fees on behalf of banks, state efforts to regulate those fees are preempted as applied to national banks and federal savings associations.
The same logic extends to payment-card networks and other participants that operate the payments system. As the IFPA litigation returns to the district court, the reasoning that supports preemption for national banks and federal savings associations also supports equitable relief for the broader payment-card ecosystem. Payment-card networks should therefore receive relief from both the IFPA’s Interchange Fee Provision and its Data Use Provision.
If the court enjoins enforcement against those participants, it should also enjoin enforcement against other federally regulated financial institutions, including credit unions. Otherwise, the IFPA would create an uneven regulatory landscape and distort competition in favor of exempted institutions.
More broadly, the IFPA shows why federal preemption remains necessary in nationally integrated banking and payments markets. Allowing states to impose inconsistent interchange-fee restrictions would fragment the payments system, increase operational complexity, shift costs to consumers, and undermine the uniform national framework established by federal banking law.
[1] National Bank Non-Interest Charges and Fees Interim Final Rule, 91 Fed. Reg. 22,989 (Apr. 29, 2026), https://www.govinfo.gov/content/pkg/FR-2026-04-29/pdf/2026-08328.pdf [hereinafter Interim Final Rule].
[2] Order Preempting the Illinois Interchange Fee Prohibition Act, 91 Fed. Reg. 23,150 (Apr. 29, 2026), https://www.govinfo.gov/content/pkg/FR-2026-04-29/pdf/2026-08341.pdf [hereinafter Interim Final Order].
[3] Julian Morris & Ben Sperry, Regulating State Interchange Fees: Evaluating the Likely Effects of the IFPA, Int’l Ctr. L. & Econ. (July 7, 2025), https://laweconcenter.org/wp-content/uploads/2025/07/IFPA-Paper-2025.pdf.
[4] See, e.g., Ben Sperry & Julian Morris, Half a Swipe, Whole Lot of Mess: Platform Economics and the Interchange Fee Cases, Truth on the Mkt. (Feb. 26, 2026), https://truthonthemarket.com/2026/02/26/half-a-swipe-whole-lot-of-mess-platform-economics-and-the-interchange-fee-cases; Julian Morris, State Regulation of Interchange Fees, Int’l Ctr. L. & Econ. (Nov. 15, 2024), https://laweconcenter.org/resources/state-regulation-of-interchange-fees.
[5] S.B. 26-134, 75th Gen. Assemb., 2d Reg. Sess. (Colo. 2026); Bill to Restrict Interchange Fees Clears Colorado Senate, ABA Banking J. (May 1, 2026), https://bankingjournal.aba.com/2026/05/bill-to-restrict-interchange-fees-clears-colorado-senate.
[6] See, e.g., Emma Kinery, States Advance Bills to Regulate Credit Card Fees on Taxes and Tips, State Affairs (Apr. 28, 2026), https://pro.stateaffairs.com/co/finance/interchange-fee-bills-2026.
[7] Illinois Bankers Ass’n v. Raoul, 760 F. Supp. 3d 636 (N.D. Ill. 2024).
[8] See Illinois Bankers Ass’n v. Raoul, No. 24-cv-07307, 2026 WL 371196 (N.D. Ill. Feb. 10, 2026).
[9] See Illinois Bankers Ass’n v. Raoul, No. 24-2844, 2026 WL 1291987 (7th Cir. 2026).
[10] See, e.g., Julian Morris, Todd J. Zywicki & Geoffrey A. Manne, The Effects of Price Controls on Payment-Card Interchange Fees: A Review and Update, Int’l Ctr. for L. & Econ. (Mar. 4, 2022), https://laweconcenter.org/wp-content/uploads/2022/03/Payments-2021-Lit-Review.pdf.
[11] See Julian Morris & Ben Sperry, The Cost of Payments: A Review, Int’l Ctr. for L. & Econ. (Aug. 28, 2024), https://laweconcenter.org/resources/the-cost-of-payments-a-review.
[12] Berhan Bayeh et al., 2026 Diary of Consumer Payment Choice, Fed. Rsrv. (2026), https://www.frbservices.org/news/research/2026-findings-diary-consumer-payment-choice.
[13] Morris & Sperry, The Cost of Payments, supra note 11; Claire Wang, Cash Me If You Can: The Impacts of Cashless Businesses on Retailers, Consumers, and Cash Use, Cash Prod. Off. Fed. Rsrv. Sys. (2019), https://www.frbsf.org/wp-content/uploads/sites/7/Cash-Me-If-You-Can-August2019.pdf.
[14] Daniel Gerzina, Epic Burger Is Now Cashless, Tamale Spaceship Closes Wicker Park Restaurant, More Intel, Eater Chi. (June 21, 2017), https://chicago.eater.com/2017/6/21/15846364/epic-burger-cashless-tamale-spaceship-closed-wicker-park-restaurant-am-intel.
[15] Id.
[16] See Morris & Sperry, Cost of Payments, supra note 11.
[17] See Julian Morris, The Hidden Wealth of Payment Cards: How Innovations in Payments Transform Society, Int’l Ctr. L. & Econ. (Dec. 19, 2024), https://laweconcenter.org/resources/the-hidden-wealth-of-payment-cards-how-innovations-in-payments-transform-society.
[18] See Todd J. Zywicki, The Economics of Payment Card Interchange Fees and the Limits of Regulation, Int’l Ctr. L. & Econ. (June 2, 2010), https://laweconcenter.org/images/articles/zywicki_interchange.pdf.
[19] See Aaron Klein et al., How Better Payment Systems Can Improve Public Transportation, Brookings Ctr. Regul. Mkt. (2023), www.brookings.edu/wp-content/uploads/2023/01/20230109_CRM_Klein_TransitPayments_final1.pdf.
[20] See Consumer Fin. Prot. Bureau, 1 Taskforce on Consumer Financial Law 586–88 (2021).
[21] One frequently cited 2019 estimate found that moving to a cashless economy could increase annual GDP by roughly 1% in advanced economies and as much as 3% in developing economies. See Marks Massi, Godfrey Sullivan, Michael Strauß & Mohammad Khan, How Cashless Payments Help Economies Grow, Bos. Consulting Grp. (May 28, 2019), https://www.bcg.com/publications/2019/cashless-payments-help-economies-grow.
[22] The shift from checks to electronic payments funded through interchange fees helped drive the rapid growth of free checking accounts and the decline in monthly maintenance fees following the rise of debit cards.
[23] For example, a consumer may wish to pay in Bitcoin, which imposes some costs on the consumer. But if a merchant declines to accept Bitcoin, the merchant incurs no corresponding costs.
[24] See Morris, Hidden Wealth, supra note 17.
[25] Ohio v. American Express Co., 585 U.S. 529, 536–37 (2018) (internal citations omitted).
[26] See, e.g., Morris, Zywicki & Manne, Effects of Price Controls, supra note 10; Mark D. Manuszak & Krzysztof Wozniak, The Impact of Price Controls in Two-Sided Markets: Evidence from US Debit Card Interchange Fee Regulation (Fin. & Econ. Discussion Series No. 2017-074, Fed. Rsrv., July 2017), https://www.federalreserve.gov/econres/feds/the-impact-of-price-controls-in-two-sided-markets-evidence-from-us-debit-cardinterchange-fee-regulation.htm; Benjamin S. Kay, Mark D. Manuszak & Cindy M. Vojtech, Bank Profitability and Debit Card Interchange Regulation: Bank Responses to the Durbin Amendment (Fin. & Econ. Discussion Series No. 2014-77, Fed. Rsrv., Sept. 2014), https://www.federalreserve.gov/econres/feds/bank-profitability-and-debit-card-interchange-regulation-bank-responses-to-thedurbin-amendment.htm.
[27] See Geoffrey A. Manne, Julian Morris & Todd J. Zywicki, Unreasonable and Disproportionate: How the Durbin Amendment Harms Poorer Americans and Small Businesses, Int’l Ctr. L. & Econ. (Apr. 25, 2017), https://laweconcenter.org/wp-content/uploads/2017/08/icledurbin_update_2017_final-1.pdf; Vladimir Mukharlyamov & Natasha Sarin, Price Regulation in Two-Sided Markets: Empirical Evidence From Debit Cards, 172 J. Fin. Econ. 1040904 (2025), https://www.sciencedirect.com/science/article/pii/S0304405X25001023.
[28] See, e.g., Zhu Wang, Scarlett Schwartz & Neil Mitchell, The Impact of the Durbin Amendment on Merchants: A Survey Study, 100 Econ. Q. 183 (2014); Mukharlyamov & Sarin, supra note 27, at 10 (“Durbin-induced interchange fee savings for gas merchants were too small for their pass-through—even if full—to be discerned with statistical significance.”).
[29] Morris, Hidden Wealth, supra note 17, at 19.
[30] See Illinois Bankers, 2026 WL 371196, at *13.
[31] Id.; see also id. at *6 (noting evidence that complying with the IFPA would be “extraordinarily expensive and will drive institutions out of the market.”).
[32] Interim Final Order, supra note 2, at 23,156.
[33] See Taxes in Illinois, Tax Found., https://taxfoundation.org/location/illinois (last visited Apr. 20, 2025) (estimating Illinois’s average sales tax rate at 8.86%. Assuming gratuities equal roughly 7% of sales at a 15% rate, taxes and tips together amount to approximately 10% of the average sale. At a 1% interchange fee, exempting taxes and tips would reduce interchange revenue by about 0.1% of the sale amount).
[34] According to the U.S. Census Bureau, Illinois retail sales totaled roughly $244 billion in 2022. See QuickFacts: Illinois, U.S. Census Bur., https://www.census.gov/quickfacts/fact/table/IL/PST045223 (last visited May 22, 2026). Assuming modest growth, retail sales likely exceed $250 billion in 2026. Interchange-fee revenue derived from sales taxes and gratuities could therefore total roughly $250 million annually. For issuers with market shares of 4% or more, that implies losses of at least $10 million.
[35] See Morris, Zywicki & Manne, Effects of Price Controls, supra note 10.
[36] Id.; Iris Chan et al., The Personal Credit Card Market in Australia: Pricing Over the Past Decade, Rsrv. Bank of Austl. (2012), https://www.rba.gov.au/publications/bulletin/2012/mar/pdf/bu-0312-7.pdf.
[37] For example, after enactment of the Durbin Amendment, many smaller merchants saw no price reductions because networks eliminated special discounts for small merchants and low-dollar transactions while acquirer fees increased. See Manne, Morris & Zywicki, Unreasonable and Disproportionate, supra note 27; see also Robert Shapiro & Jerome Davis, The Unanticipated Costs and Consequences of Federal Reserve Regulation of Debit Card Interchange Fees 4, Progressive Pol’y Inst. (2025), https://www.progressivepolicy.org/wp-content/uploads/2025/12/PPI_The-Unanticipated-Costs-and-Consequences-of-Federal-Reserve-Regulation-of-Debit-Card-Interchange-Fees_V3.pdf.
[38] Todd J. Zywicki et al., Price Controls on Payment Card Interchange Fees: The U.S. Experience (Geo. Mason L. & Econ. Rsch. Paper No. 14-18, 2014), https://www.law.gmu.edu/pubs/papers/14_18.
[39] Id.; see also Manne, Morris & Zywicki, Unreasonable and Disproportionate, supra note 27.
[40] See Julian Morris, The Credit Card Competition Act’s Potential Effects on Airline Co-Branded Cards, Airlines, and Consumers, Int’l Ctr. L. & Econ. (Nov. 17, 2023), https://laweconcenter.org/resources/the-credit-card-competition-acts-potential-effects-on-airline-co-branded-cards-airlines-and-consumers.
[41] Illinois Bankers Ass’n v. Raoul, 760 F. Supp. 3d 636, 657 (N.D. Ill. 2024) (“Illinois Bankers have shown that they are likely to prevail on the merits of their claim that the IFPA’s Interchange Fee Prohibition violates the federal rights of national banks and is preempted by the NBA under the Barnett Bank standard.”).
[42] See Illinois Bankers, 2026 WL 371196, at *13 (“[T]he core snag in Plaintiffs’ case—third parties set the fees . . . . The Payment Card Networks built this ecosystem, and the Payment Card Networks set these fees.”).
[43] Id. at *2 (“Though the Payment Card Networks set the default interchange fees, they do so on behalf of the other entities . . . .”).
[44] See Interim Final Order, supra note 2, at 23,154.
[45] Illinois Bankers Ass’n v. Raoul, No. 24-cv-07307, 2025 WL 409060, at *4 (N.D. Ill. Feb. 6, 2025) (“Because the Court found that the NBA likely preempts the IFPA with respect to federal banks, applying § 1831a(j)(1), the IFPA is likely preempted with respect to out-of-state state banks.”).
[46] Illinois Bankers, 2026 WL 371196, at *3.
[47] Id. at *21.
[48] See Interim Final Order, supra note 2, at 23,154.
[49] See S.B. 26-134, supra note 5. Colorado’s apparent purpose in adopting a $60 billion issuer threshold is to exempt in-state community banks and credit unions while imposing compliance costs on out-of-state issuers. Likewise, the statute’s application to payment networks rather than issuers appears designed to evade the Comptroller’s preemption authority.
[50] These bills are current as of May, 28, 2026.