DENVER—A Colorado bill that would bar interchange fees from being charged on the sales-tax portion of card transactions is advancing at the state capitol, opening a new front in the swipe-fee fight that has already put Illinois credit unions on alert.
Senate Bill 26-134 cleared the Colorado Senate Business, Labor & Technology Committee on a 3-2 party-line vote March 12 and now moves to the full Senate.
As reported by The Colorado Sun, supporters are framing the measure as a targeted effort to stop merchants from paying interchange on money that ultimately belongs to the state, not the retailer. The bill would prohibit payment card networks from including sales tax in the base used to calculate interchange fees, while exempting issuers with less than $60 billion in consolidated assets and providing compliance options that include excluding tax at settlement or rebating the tax-related portion afterward.
For credit unions, however, the debate sounds strikingly familiar. The Colorado Sun reported that Elevations Credit Union warned interchange income helps support fraud prevention and that current payment systems are not built to isolate the fee attributable only to sales tax in real time. That echoes the arguments CUToday.info has been reporting out of Illinois, where credit unions and other plaintiffs have said state-level interchange restrictions create operational risk, require major systems changes and could expose issuers to new costs and compliance uncertainty.
CUToday.info reported on Feb. 10 that Chief U.S. District Judge Virginia Kendall largely upheld the core of Illinois’ Interchange Fee Prohibition Act, refusing to block the provision barring interchange on the tax and gratuity portions of transactions, while separately enjoining the law’s data-usage limitation. The ruling left the statute alive, though narrower, and kept in place a July 1, 2026, effective date that credit union groups say could force major changes across the payments system.
The legal fight in Illinois has only intensified since then. On Feb. 24, CUToday.info reported that the Illinois attorney general filed a cross-appeal seeking to revive the blocked data-use provisions, while America’s Credit Unions, the Illinois Credit Union League and other plaintiffs continued pressing their own appeal. Then on March 9, CUToday.info reported ACU and ICUL had filed a Seventh Circuit brief arguing the Illinois law is preempted by federal law and warning compliance would impose severe burdens on financial institutions and the broader card ecosystem.