Illinois Legislature Postpones Controversial Interchange Fee Law to 2026

Illinois General Assembly Delays Interchange Fee Law

On June 1, 2025, the Illinois General Assembly announced a delay in the implementation of the controversial Interchange Fee Prohibition Act, pushing the start date back to July 1, 2026. This decision, hailed by local financial institutions and small business advocates, comes amid a federal court challenge that has temporarily suspended certain aspects of the law.

Critics argue that the Act, which aims to regulate interchange fees for credit and debit card transactions, could lead to economic upheaval for Illinois's small businesses and financial institutions. Proponents of the delay, including Ben Jackson, the Executive Vice President of the Illinois Bankers Association, emphasized the potential for widespread disruption if the law were to take effect as originally planned. Jackson stated, "This law will cause widespread economic disruption," and noted that it disproportionately favors large corporations while imposing an undue burden on smaller entities.

The Interchange Fee Prohibition Act was introduced as part of a last-minute provision in Illinois' budget last May. Its implementation promises to change the payment landscape drastically, potentially forcing consumers to pay taxes or gratuities in cash or through checks, and requiring multiple transactions for purchases—a system that has never been trialed anywhere else globally.

Ashley Sharp, Senior Vice President of State Advocacy for the Illinois Credit Union League, expressed gratitude for the assembly's decision to delay the law, citing the urgent need for relief from a policy that threatens consumer services and the overall health of local economies. As part of a coalition challenging the law, she echoed calls for its repeal, warning of adverse effects on customers whom credit unions serve.

The delay followed a partial preliminary injunction granted in federal court, which exempted national banks and federal savings banks from compliance. However, state-chartered banks and credit unions, which form the backbone of Illinois's financial landscape, remain under the threat of these disruptive regulations.

The impact of the Interchange Fee Prohibition Act is a central concern not only for financial institutions but also for small business owners. A study highlighted that the largest retailers would gain significantly from the proposed changes, soaking up nearly 40% of an estimated $118 million reduction in interchange fees—benefiting corporate entities at the expense of smaller competitors.

Lou Sandoval, President of the Illinois Chamber of Commerce, articulated the sentiment among business leaders, stating, "The Illinois General Assembly took a step in the right direction by delaying the implementation of the Interchange Fee Prohibition Act, a law that will disrupt a system that has worked efficiently for decades."

He urged lawmakers to focus on policies that support small businesses rather than introducing measures that could hinder their operations. Similarly, entities such as the Illinois State Black Chamber of Commerce and the Illinois Hispanic Chamber of Commerce have taken a stand advocating for the law's repeal, citing its potential ramifications on small enterprises, many of which operate on thin margins and possess limited access to capital.

Larry Ivory, President of the Illinois State Black Chamber of Commerce, framed the assembly's decision as a necessary safeguard for small business owners threatened by the impending law. Ivory emphasized, "Delaying the implementation gives small business owners the protections they deserve while the law continues to be challenged in federal court."

With small businesses calling for clearer, more favorable regulations, the urgent need for legislative action against the Interchange Fee Prohibition Act has never been more evident. Jaime di Paulo, President of the Illinois Hispanic Chamber of Commerce, remarked that the measures, if enacted, would limit payment options, disrupt existing systems, and ultimately lead to higher costs for consumers.

As Illinois faces many facets of economic recovery and growth, the battle over the Interchange Fee Prohibition Act reflects broader concerns about local economies and the sustainability of small businesses. The conversation surrounding this law will continue as stakeholders advocate for a legislative environment that prioritizes the interests and well-being of local entrepreneurs and communities.

To stay informed, visit guardyourcard.com/Illinois for updates and advocacy efforts regarding the future of this law and its implications for small businesses.