Repeal the Interchange Fee Prohibition Act (IFPA)

Background: The Interchange Fee Prohibition Act (IFPA), passed in the dead of night during the final days of the 2024 session, prohibits charging interchange fees on the tax and gratuity (tip) portions of a card transaction. Banks of all sizes will incur enormous direct costs and risks, along with operational challenges, if the IFPA is implemented.  

What does the Illinois interchange law mean for your bank? 

• Implementation Costs: Existing payment systems are not engineered to handle the IFPA’s radical changes. Banks, networks, processors, and merchants would invest years and unfathomable costs to reengineer the consumer payment systems to comply. It’s still uncertain if this can be done at all.
• Processing Challenges: Under the IFPA, merchants have two methods of compliance: a point-of-sale separation of “exempt” charges (which will lead to declined transactions or “split” transactions), or a manual reconciliation process. Under the manual method, merchants have 180 days to ask their bank for reimbursement of exempt interchange costs and banks then have just 30 days to reimburse.This would impose substantial administrative burdens on the banking industry and real costs.
• Significant Costs: The banking industry must invest in new staff under the IFPA, especially to comply with the manual reconciliation process. For any small bank, implementation costs will easily exceed debit card revenue and curtail funding for consumer benefits such as fraud protection, data security, customer service, and rewards.
• Civil Liability Risk: The law provides for extreme penalties of $1,000 per violation. One IBA member bank says they processed over 400 million credit and debit card transactions for Illinois merchants in 2023. If the bank erroneously charged interchange in only 0.01% of those transactions annually, the bank could be exposed to $40 million in civil penalties.
• Fraud Risk: The IFPA prohibits the financial industry from using payment data other than to process transactions. This creates fraud risks for consumers, since financial companies utilize payments data for fraud detection and prevention, and creates regulatory compliance challenges for your bank.

The IFPA is a big-box retailer bailout that does not generate any state revenue yet imposes unfathomable costs and risks on the banking industry. As litigation is still ongoing, we need you to ask your local lawmakers to support a simple extension or suspension of the IFPA now and to support a full repeal once the litigation has concluded.