Op-Ed: Consumers, small businesses will lose if Illinois interchange law takes effect in July

By Managing Editor | May 28, 2025 |

By ASHLEY SHARP and BEN JACKSON

A law called the Interchange Fee Prohibition Act (IFPA) was passed by the Illinois Legislature last spring as part of a last-minute political deal. Now it’s set to take effect July 1 and will cause chaos for Illinoisans across the state.

There is a reason it was rushed through the Legislature – it is a fundamentally flawed proposal that has been rejected in every other state that has considered it across the nation.

The law requires Illinois financial companies to refrain from charging merchants processing fees on the tax and tip portions of debit or credit card payments.

These processing costs, referred to as interchange fees, are business-to-business fees that benefit the consumer and the merchant by ensuring fast, convenient and virtually guaranteed payments for goods and services.

Merchants in recent years have chosen to saddle consumers with these costs, through a service or “convenience” fee that is often double the cost of the actual interchange fee. These annoying merchant fees won’t go away under the new law.

Slicing off a portion of the interchange fee sounds simple. Yet the law requires massive changes that undermine the reliability and security of consumer payments. The IFPA also violates federal law, which is why our groups are challenging it in federal court.

Consumers won’t benefit from the IFPA. When federal price controls on debit cards were adopted in the 2010s, data showed that consumers did not enjoy the promised cost savings – big retail simply pocketed the money while consumer benefits disappeared. Debit card rewards, for example, are all but extinct today.

Likewise, Illinois’ law will jeopardize consumer benefits like security, convenience, and reward points. Fast, convenient electronic payments will be diminished, leaving consumers with clunky, frustrating retail experiences that might include split payments or declined transactions.

Small businesses will also be victims of this law. A recent study shows that 40 of the largest retailers will soak up nearly 40 percent of the projected savings. Small businesses’ savings will be a wash after considering implementation costs in the tens of thousands of dollars.

The IFPA will not save consumers money, and it will not erase those pesky retail “convenience” fees. It will harm local small businesses and financial institutions, and it will jeopardize credit card rewards and protections. Clearly, this law is a bad deal for Illinoisans. The Illinois Legislature should repeal the IFPA before July 1.

Ashley Sharp is senior vice president of State Advocacy and Legislative Counsel.

Ben Jackson is executive vice president at the Illinois Bankers Association.