MPC Welcomes Ruling On Illinois Ban on Swipe Fees on Sales Taxes, Tips

WASHINGTON, D.C. (December 20, 2024) – The Merchants Payments Coalition (MPC) welcomed a judge’s ruling that credit card payment networks like Visa and Mastercard must comply with Illinois’ ban on swipe fees on sales tax and tips.

“Illinois small businesses and their customers, along with workers who depend on tips, will benefit from protection against Visa and Mastercard’s abusive swipe fees under this law,” said Doug Kantor, MPC Executive Committee member and National Association of Convenience Stores (NACS) General Counsel. “The judge agreed that Visa and Mastercard cannot burden businesses and consumers with fees on taxes and tips. The card industry will still collect billions in swipe fees in Illinois alone under this law, but it is a key first step in bringing swipe fees under control. We look forward to the law taking effect against Visa and Mastercard in July.”

U.S. District Judge Virginia Kendell issued a ruling granting a preliminary injunction preventing the Interchange Fee Prohibition Act from being enforced against banks but saying it could be enforced against card networks such as Visa and Mastercard. A hearing on additional issues will be held January 15, 2025.

Three MPC member associations – NACS, the National Retail Federation (NRF) and the Food Industry Association (FMI) – asked the court’s permission this fall to take part in banks’ litigation challenging the law, saying merchants’ perspective is needed to understand the high cost the fees impose on small business and their customers. The law bans card networks and banks from collecting swipe fees on the tax portion of transactions or on workers’ tips beginning July 1, 2025. The suit was filed in August by the Illinois Bankers Association, the American Bankers Association, America’s Credit Unions and the Illinois Credit Union League.

The Illinois law comes as Congress is considering the Credit Card Competition Act. Under the legislation, banks with at least $100 billion in assets would be required to enable credit cards to be processed over at least one unaffiliated network like Star, NYCE or Shazam in addition to Visa or Mastercard. The measure is expected to result in competition over fees, security and service that would save merchants and their customers over $16 billion a year. Visa and Mastercard currently control over 80% of the credit card market and each centrally sets the “swipe” fees all banks issuing their cards charge. Each also restricts processing of transactions to its own network.

NSGA is a member of the Merchants Payments Coalition (MPC).