SPRINGFIELD, Ill.–Card issuers and card companies in this state are raising significant concerns around a new law in Illinois that is the first in the nation to ban banks and credit card companies from charging retailers an interchange fee on sales taxes and tips.
Since Gov. J.B. Pritzker signed the ban into law, financial institutions that opposed the measure have “ratcheted up their opposition and amplified their rhetoric, saying the move isn’t just bad for them but will also cause headaches for consumers,” according to the Chicago Tribune.
The pushback includes an effort backed by credit card companies and banks that have begun running online ads in Illinois declaring the ban “MAY FORCE YOU TO PAY FOR PARTS OF PURCHASE IN CASH,” and print ads saying, “Tipping on your credit card is closed to Illinoisans.”
‘Years-Long Fight?’
According to the Tribune analysis, while some supporters — which include many Democrats and Illinois’ main association for retailers — say “those claims are hyperbolic, the new law is setting up what could be a yearslong fight between the state and financial institutions that argue the overhaul is not only a bad idea but is unrealistic because it calls for implementation in a little more than a year.”
As CUToday.info has previously reported, at the heart of the disagreement are the interchange fees charged by card companies and issuers.
‘Nightmares for Small Businesses’
“The new law would bar the financial institutions from charging the so-called interchange fees on the tax or gratuity portions of customers’ bills, with the goal being to lower the amount that credit card companies can charge retailers,” the Tribune explained. “Both sides say they are advocating for consumers. Supporters of the ban say the interchange fees are hidden charges that get passed down to customers. Opponents argue the law will create chaos for anyone in Illinois who uses a credit or debit card by potentially forcing separate transactions — one for purchases of goods and another for taxes and tips — while also creating paperwork nightmares for small businesses.”