Legal battle deepens over Illinois’ Interchange Fee Prohibition Act

(The Center Square) – More players are getting involved in the fight over an Illinois law that seeks to ban card interchange fees on taxes and tips.

Illinois' Interchange Fee Prohibition Act doesn’t ban or restrict credit card swipe fees, but it limits banks from charging interchange fees on tax and tip transactions.

Restaurant organizations have now filed legal briefs against the law, and Illinois U.S. Senator Dick Durbin, D-Springfield, has filed a brief in support of the law.

“Both the Durbin Amendment and the IFPA take important steps to rein in debit interchange fee collusion that card networks like Visa and Mastercard facilitate on behalf of their card-issuing financial institutions,” Durbin’s lawyers said in a court filing.

Machalagh Carr, director of the Center for Legal Action for the American Free Enterprise Chamber of Commerce, said it is alarming that a senator from the Land of Lincoln is seeking to take the state back to a Civil War era patchwork of banking, but she is confident the law will be thrown out.

“There’s a strong chance that the law will get struck down, that would be ideal,” said Carr. “Not only do I think on a macro level that this is a bad idea for a free market economy, but on a micro level, this particular law is unworkable and easier to make the case that this should not be left in effect.”

Last month, Carr's group filed an amicus brief in the ongoing lawsuit against the law, outlining what they called the “devastating damage” posed to the debit and credit payment system in the United States.

The Office of the Comptroller of the Currency, an independent bureau of the U.S. Department of the Treasury, has also filed an amicus brief against the law, saying it's "misguided" and will leave national banks with "extraordinary operational burdens."

The law was backed by the Illinois Retail Merchants Association and is the first such statute in the country, is scheduled to take effect next July.