Credit Unions Ask Appeals Court to Block Illinois Interchange Fee Ban Before July 1

America’s Credit Unions has ramped up its opposition to the Illinois Interchange Fee Prohibition Act (IFPA). The national trade association joined with other groups to file a brief with the U.S. Court of Appeals for the Seventh Circuit. The parties want the courts to squash the Interchange Fee Prohibition Act before it takes effect on July 1.

In February, a judge upheld the Interchange Fee Prohibition Act, which will restrict financial institutions from charging interchange fees on the tax and tip portions of a bill paid with a credit or debit card in Illinois. America’s Credit Unions and Illinois Credit Union League are appealing that decision. 

Many credit card issuers will be watching closely to see if the Interchange Fee Prohibition Act will survive the appeal process and go into effect at the start of the third quarter.

If the Interchange Fee Prohibition Act advances in Illinois, other states may successfully place similar restrictions on a credit card issuer’s ability to receive compensation for cardholder services.

The IFPA will take effect on July 1 if efforts to postpone or terminate it aren’t successful.

Taxes and tips make up just a fraction of a cardholder’s entire bill in many cases. But over the course of numerous transactions, interchange on those relatively small charges can add up to significant revenue for credit card companies. 

While the financial losses for issuers could be severe if the Illinois act takes effect, PricewaterhouseCoopers outlined on its website how it also could cause problems for others operating in the card ecosystem.

“Industry stakeholders have raised concerns about the ability to comply with the IFPA based on substantial changes to the existing data infrastructure used by merchants, issuers, and payment card networks,” PricewaterhouseCoopers wrote.

The brief from America’s Credit Unions and its partners highlights just how disastrous the Illinois Interchange Fee Prohibition Act may be for certain stakeholders.

“[C]omplying with it imposes regulatory requirements so out of step with how the system functions that it will, as the District Court acknowledged, cause costs that are ‘undeniable’ and ‘staggering’, with ‘business-ending consequences for some members of the market,’” the brief stated.

Many business owners who already have their hands full maintaining the daily operations of their company now have another item on their to-do list, and it’s not a simple one. They need to ensure that they can adhere to the statute.

As PwCPricewaterhouseCoopers notes, organizations that use the payment card network should determine, among other actions, whether point-of-sale systems have the functionality to separate taxes — both state and local — as well as the tip portions of a transaction.

With the first quarter of 2026 nearly over, time is running out for those that want to see the IFPA halted. The credit card industry will have its sights set on Illinois over the coming months to see what happens next. And CardRates will continue to track this story for further developments.