SPRINGFIELD, Ill. (WAND) — A federal agency has joined the growing number of banks and credit unions opposing an Illinois law banning swipe fees. The Biden administration believes the plan is bad policy and conflicts with federal law.
Your favorite coffee shop or boutique only receives a portion of the money each time you swipe at a register due to interchange fees. Illinois is set to ban swipe fees on July 1, but bank leaders claim it could cause chaos.
"It will harm consumer transactions across the state," said Ben Jackson, executive vice president of government relations for the Illinois Bankers Association. "It will fundamentally change how those are conducted at the point of sale and alter the consumer experience transaction to transaction."
The Biden administration said the plan is an ill-conceived, highly unusual and largely unworkable state law that threatens to fragment and disrupt an efficient and effective system. However, Illinois retail leaders said the change is critical.
"We built on some of the work of others. While we were the first to get it done right, it has been broadly debated in other states over time," said Rob Karr, President and CEO of the Illinois Retail Merchants Association. "Tennessee has been a particular hotbed of it, but it’s also been Florida, California and other places."
The Illinois Attorney General’s office explained that basic economics teaches that these fees are passed on to consumers through higher prices. Kwame Raoul argued limiting swipe fees to goods and services will reduce the financial burden on consumers and retailers.
"Running a small business is not easy. Every penny counts," said Pamela Frazier, President and CEO of All In One Laundry Center & Services. "High credit card fees only make it difficult to make ends meet."
Gov. JB Pritzker told reporters at an unrelated press conference that he isn’t deeply concerned with the legal battle. Pritzker argued the law will have a positive impact.
"When things get brought to court, you never know how they’ll turn out," Pritzker said. "I think this one is one that can be defended well and we’ll end up with the law that we have on the books being affirmed."
Although, the Illinois Bankers Association remains confident in the strength of their case.
Raoul wrote that banks and credit unions are urgently asking a federal court to protect them from a law that cannot be enforced for another nine months. He argued the court should deny their motion and dismiss their complaint.
Electronic Payments Coalition Executive Chairman Richard Hunt called the new Illinois law illegal.
"For small businesses, the new law would impact functionality of our nationwide payments systems and, for consumers, increase fraud risks and lead to higher fees," Hunt said.
Oral arguments for the federal court case are scheduled to begin October 30.
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