Assistant Minority Leader and State Representative John M. Cabello has filed new legislation, House Bill 5743, aimed at repealing a new state law set to take effect this summer that prohibits financial institutions and card networks from charging interchange fees (swipe fees) on the sales tax and tip portions of credit/debit transactions.
“The last thing Illinois’ small businesses need is a new state law that creates uncertainty and increases their costs,” Leader Cabello said. “At the same time, consumers deserve certainty that they will be able to use a credit or debit card to pay for the sales tax or tipped portion of their bill without unnecessary complications. My bill would prevent the chaos and higher costs that would result from the new state law taking effect this summer if the General Assembly fails to act.”
Credit card companies charge a 1% to 3% fee on transactions, known as a swipe fee or interchange fee. The fees help fund fraud prevention and rewards programs. The Illinois Interchange Fee Prohibition Act (IFPA) set to go into effect July 1 would ban those fees from being collected on the sales tax or tipped portion of a transaction, creating complications at checkout, particularly for businesses that rely on existing payment systems that are not designed to separate taxes and tips from the total transaction amount. There are also concerns about how the law could impact small businesses and workers who rely on tips, as well as whether businesses will need to adopt costly new systems or processes to comply.
An ongoing court case challenging the law could ultimately determine whether it is implemented at all. While a court recently ruled in favor of the law, the decision is currently being appealed; and the outcome from a legal standpoint remains uncertain.
The Spring Session of the Illinois House of Representatives continues Tuesday with seven weeks remaining until scheduled adjournment on May 31.
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John M. Cabello is the Assistant Minority Leader and State Representative for Illinois’ 90th House District, which includes the following communities in Winnebago, Stephenson, and Boone counties: Rockford, Machesney Park, Freeport, Roscoe, Loves Park, Rockton, South Beloit, Caledonia, Davis, Durand, Rock City, and Rockton.