Woodstock Institute wrote to Illinois leaders expressing our concerns regarding implementation of the Illinois Interchange Fee Prohibition Act (IFPA), which seeks to reduce costs for businesses and consumers by banning financial institutions from charging interchange (“swipe”) fees on tax and tips. The IFPA is the first-of-its-kind in the nation.
While we sympathize with the law’s intent to lower costs, we urge more time for the involved parties to ensure this change would not have unintended near-term consequences that exacerbate the affordability crisis, including by creating an additional burden on small businesses or further degrading the ability of small, community financial institutions to sustainably provide financial products and services.
Our concerns include:
- The current implementation timeline would likely result in small, community credit unions and banks exiting the market for payment processing.
- If interchange fees are reduced, the institutions that continue processing card payments may compensate by increasing the fee they charge to businesses for accepting credit cards.
- There is insufficient information to determine whether and to what degree small businesses and consumers would ultimately benefit from the IFPA.
These are not intractable problems, but they require more time to resolve than the current July 1 implementation deadline allows.
