Illinois Swipe Fee Law Upheld by Federal Court

An Illinois ban on card interchange fees for taxes and tips has survived a court challenge.

The U.S. District Court for the Northern District of Illinois Eastern Division on Tuesday (Feb. 10) sided against a group of financial services organizations which had sued state Attorney General Kwame Raoul over the Illinois Interchange Fee Prohibition Act (IFPA).

The law, set to go into effect in July, prohibits banks and credit card companies from charging interchange fees — also known as “swipe fees” — on the sales tax and tip portions of credit and debit card transactions.

The court’s ruling rejected the plaintiffs’ claims that federal banking law supersedes the IFPA, finding that interchange fees are set by card networks rather than banks, and are thus not in conflict with federal banking oversight.

“The payment card networks built this ecosystem, and the payment card networks set these fees,” Judge Virginia Kendall wrote.

The judge did side with the plaintiffs by permanently enjoining the law’s separate data usage limitation, saying federal banking law did preempt that aspect of the litigation.

The National Restaurant Association, which had supported the Illinois attorney general in the case, issued a news release praising the ruling.

“This decision is a meaningful win for Illinois restaurants that have been shouldering rising costs on every transaction,” said Sean Kennedy, the association’s executive vice president.

“Just as importantly, it lays a clear legal path for other states to follow Illinois’ lead and address credit card processing fees—one of the highest and fastest‑growing costs facing restaurant owners today. This decision shows that state legislatures can take meaningful action to rein in unfair swipe fees to support local businesses.”

Americas Credit Unions, one of the plaintiffs in the case, said it was disappointed in the ruling and would appeal.

“The decision not to protect the payment system from this misguided state law is a serious error that will unleash chaos and confusion on Illinois consumers and businesses. We cannot let that stand,” the group said in a news release.

“In light of this outcome, we renew our call for state lawmakers to repeal this flawed law before it can do any more harm to the Illinois economy. The fight over IFPA and any similar proposal will continue.”

The IFPA was signed into law in June of 2024 and challenged in a suit brought by the Illinois Credit Union League, America’s Credit Unions, Illinois Bankers Association and American Bankers Association.

The law had been set to go into effect on July 1, 2025, but Gov. J.B. Pritzker last year signed legislation pushing back implementation for one year.