An Illinois law set to take effect July 1, 2026, prohibits credit card companies and banks from charging interchange fees on sales tax and tips. This first-of-its-kind legislation faces intense opposition from the financial industry.
Industry groups argue the law is technically unworkable and threatens national payment systems. Critics also warn the measure could disrupt popular credit card rewards programs.
Banking and credit union associations filed a lawsuit to block the measure, which is currently under appeal. The U.S. Office of the Comptroller of the Currency (OCC) recently issued an order to preempt the state law.
The federal regulator asserts that federal law overrides state attempts to regulate fees for national banks. This escalation creates a legal showdown over state versus federal authority.