FOR IMMEDIATE RELEASE
Contact: J. Craig Shearman
(202) 257-3678 craig@shearmancommunications.com
WASHINGTON, October 7, 2024 – Three Merchants Payments Coalition member associations have asked permission to take part in a lawsuit over Illinois’ new law banning credit card swipe fees on sales taxes and tips, saying merchants’ perspective is needed to understand the high cost the fees impose on small business and their customers.
“Banking groups have claimed this law would be burdensome for merchants and difficult to implement, but we can show that simply isn’t true,” NRF Chief Administrative Officer and General Counsel Stephanie Martz said. “Merchants will be directly impacted by the outcome of this case and should be allowed to fully participate. Swipe fees on sales taxes and tips are a huge burden for small businesses and their employees, and ultimately drive up prices for consumers. This landmark law must be upheld.”
“Consumers and small businesses are looking closely at their costs in this economic environment and this work to protect the Illinois law banning swipe fees on taxes and tips could go a long way toward ensuring that people are not forced to pay unnecessary fees to credit card companies in these instances,” FMI – the Food Industry Association Chief Public Policy Officer Jennifer Hatcher said.
“Visa and Mastercard, not banks, set the prices of swipe fees,” National Association of Convention Stores General Counsel Doug Kantor said. “Federal banking law simply doesn't prevent states from reining in these inflationary, centrally fixed fees. The U.S. credit card industry will still collect the highest fees in the world, even with the Illinois law in place. There is no justification for slowing the Illinois law from taking effect."
Martz, Hatcher and Kantor are all members of the MPC Executive Committee.
On Friday, NRF, FMI and NACS along with the Illinois Retail Merchants Association and the Illinois Fuel and Retail Association filed a motion in U.S. District Court in Chicago seeking to intervene in a lawsuit challenging the Interchange Fee Prohibition Act. The law bans card networks and banks from collecting swipe fees on the sales 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 claiming the law is preempted by federal banking law and unworkable for merchants.
“Merchant members of IRMA, IFRA, NRF, NACS and FMI are primary targets of a multi-billion-dollar interchange fee practice,” the motion said, citing $224 billion in annual processing costs. “IRMA, IFRA, NRF, NACS and FMI have an interest in their members not being charged excessive interchange fees on funds that are not theirs, such as taxes and tips, and in safeguarding the ability of states like Illinois to protect the interests of merchants and consumers from such economically harmful practices.”
If allowed to intervene, the merchant associations would become parties to the suit. While Illinois Attorney General Kwame Raoul is well-positioned to defend the law itself, the motion said merchants are better able to address banks’ claims that the law would be burdensome and difficult to implement.
A proposed brief filed along with the motion “rebuts (banks’) contentions regarding how burdensome” the new law would be and shows that its requirements “are feasible and not overly costly,” the motion said. “The Court need not simply take the banks at their word; the Court can instead hear from other affected parties.” Merchants are prepared to offer “the perspective of those with years of experience in the industry” that is “crucial to assessing the credibility of (banks’) allegations.” The brief says claims that the law is preempted by federal banking law are “hyperbolic.”
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.
About MPC
The Merchants Payments Coalition represents retailers, supermarkets, convenience stores, gasoline stations, online merchants and others fighting for a more competitive and transparent card system that is fair to consumers and merchants. Follow MPC on Twitter, Facebook or LinkedIn for the latest on swipe fees.
