Illinois swipe – A federal appeals court remanded an Illinois law aimed at limiting credit card swipe fees, keeping the dispute in flux for merchants and banks.
A fight over credit card “swipe fees” in Illinois is far from over after a federal appeals court sent the case back to lower court, prolonging uncertainty for small businesses that depend heavily on card payments.
When customers use credit cards, businesses typically pay an interchange fee for each transaction.. Those charges. which can range from roughly 2% to 4%. often reflect more than just the purchase price. and they apply to amounts that include sales tax and workers’ tips.. Illinois’ dispute centers on whether the state can limit how those fees are calculated and applied.
In 2024, Illinois enacted what it described as a first-of-its-kind law to end credit card fees on sales tax and tips businesses pay. The Interchange Fee Prohibition Act was set to take effect July 1, but implementation has been blocked while banks challenge the measure in court.
A federal judge upheld parts of the law in February, but the plaintiffs appealed.. Oral arguments were scheduled for Wednesday, yet they were canceled after the U.S.. Court of Appeals for the 7th Circuit sent the case back to district court last week.. Rob Karr. CEO of the Illinois Retail Merchants Association. said the procedural move reflects what he described as an attempt by credit card companies to introduce a new issue at the appellate level.
The plaintiffs, including the Illinois Bankers Association, said they welcome the opportunity to continue their challenge in district court. In their view, the Illinois law conflicts with federal law, and they pointed to recent regulatory actions as support for that argument.
The remand was tied to consideration of a recent order from the U.S.. Office of the Comptroller of the Currency, an agency within the U.S.. Department of the Treasury.. In April. the OCC’s order exempted national banks from the Illinois law. while leaving out Illinois credit unions and community banks—an arrangement that has become central to the legal and practical uncertainty facing payment systems.
Karr also criticized the broader posture of the industry and banking groups.. In an April statement. he argued that banks and credit card companies would do “whatever it takes” to protect swipe-fee charging power. including reaching out to the Trump administration to block a law that had already survived at least some judicial review.
A separate response came from the Electronic Payments Coalition, which represents Visa, Mastercard and banks.. The group praised the OCC’s order and urged Illinois to repeal the law.. It warned that the measure introduces significant uncertainty in the market. because some cards may be treated differently from others depending on the exemption structure.
Whether the Illinois law will ultimately take effect on schedule remains unclear.. Even as the legal process stretches on. the outcome could determine how merchants handle card acceptance and fee disclosure—especially in states where retail and restaurant owners say payment costs are already squeezing budgets.
For small businesses, the fees can feel less like an abstract policy dispute and more like a recurring bill.. Minyoli, a family-owned Taiwanese restaurant in Andersonville, has already adjusted how it handles multiple payments.. The business stopped allowing customers to split a bill across multiple credit cards. citing the way it is charged a percentage of the bill plus a flat fee for each swipe.
Minyoli’s general manager, X Wang, said the restaurant’s profit margins are too tight for swipe fees to be absorbed. With nearly all transactions conducted by credit card, Wang described the charges as a “permanent” cost rather than something that can be minimized through ordinary budgeting.
Other retailers say swipe fees compound existing economic pressures.. Art Potash, owner of Potash Markets, pointed to inflation and competition from larger supermarket chains.. He said swipe fees hinder the business by adding to the costs of operating. and that those costs can flow into the prices customers see.
Potash argued that the law is unfairly targeted because retailers are charged fees on sales tax that customers pay to the state.. In his framing, the money is collected on the government’s behalf rather than for the retailer’s own use.. “It’s not our money,” he said, adding that the state seeking to correct the issue makes sense to him.
As card usage expands, the cost for merchants can grow even when sales are steady.. At 2Bears Tavern Group. which owns multiple venues including Marty’s Martini Bar in Andersonville. leaders say credit card transactions have become nearly universal.. Ben Jackson. an executive vice president at the Illinois Bankers Association. said the law would disrupt transactions. create confusion. and add burdens to small businesses—concerns echoed by merchants who warn that payment system adjustments can be costly.
2Bears’ president, Mark Robertson, said his company does not expect to change its payment system because it already clearly delineates fee information. He also argued that compliance could be implemented without issue, delay, or cost.
A key dispute within the broader debate is how fees affect tipped labor.. Robertson said 2Bears does not deduct swipe fees from workers’ tips, even though businesses are allowed to do so.. With wage pressures rising for tipped workers. he said some operators may eventually have to consider deductions as a way to manage costs.
Robertson described card fees as difficult for businesses to control other than passing them on or opting out of card acceptance. He said an increasing number of companies respond by charging additional fees at checkout, essentially shifting costs directly to consumers.
He also linked the swipe-fee fight to larger economic and regulatory pressures.. Robertson said inflation has remained unrelenting since the COVID-19 era, and he described consumer behavior as more cautious on spending.. In his view. those pressures—paired with what he called a locally unfriendly regulatory environment for small businesses—make the outlook for the local economy less optimistic.
For 2Bears, the Illinois swipe-fee law represented one of the few perceived positives for the hospitality industry in recent years. Robertson said the measure draws a line in costs that many businesses say they are reaching a breaking point to absorb.
Even as courts continue to sort through federal versus state authority and the meaning of the OCC’s exemption, merchants say they are trying to plan for a payment environment that has become increasingly expensive and harder to predict.
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