Federal OCC agency blocks Illinois from limiting credit card swipe fees

The Office of the Comptroller of the currency is getting in the way of an Illinois law that would limit the purchases credit card companies can charge "swipe fees" on to just the base purchase, excluding tax and tip. The law was set to take effect July 1, but the new ruling from the OCC, a subsection of the Treasury, says the Illinois' Interchange Fee Prohibition Act is "bad law" and "unworkable"—and they've been saying that since 2024 under the Biden administration.

The National Banking Act says that states are not permitted to regulate banking fees. But in February, US District Judge Virginia Kendall said that the Illinois law is not attempting to regulate banking fees as these swipe fees are charged not by banks by credit card companies, i.e. third parties. Because of that, Kendall said, the Illinois law does not violate federal law.

Banks that operate credit cards have appealed to the 7th Circuit Court of Appeals. Arguments will be heard in that case on May 13.

Kendall addressed the OCC's assertion that limiting credit card fees to the base purchase and excluding tax and tip is "bad policy." Kendall said "That may well be true. But even the Office of the Comptroller does not meaningfully contest that, the third parties set the fees."

She further addressed the claim from banks that the Illinois law violates the National Banking Act by saying that if Illinois cannot regulate fees charged by banking adjacent third parties, banks would then be able to concoct schemes to "shield a vast amount of their otherwise regulatable activities from State regulation by hiding behind third-party entities like the credit card companies."

In January, Senator Dick Durbin (D-IL) and Roger Marshall, M.D. (R-KS) reintroduced the Credit Card Competition Act, which would limit swipe fees. President Donald Trump backed the Act, saying "Everyone should support great Republican Senator Roger Marshall's Credit Card Competition Act, in order to stop the out of control Swipe Fee ripoff."

"Americans are struggling with everyday purchases like groceries and gas, and credit card swipe fees inflate those already exorbitant prices," said Durbin at the time. "By bringing real competition to credit card networks, which is currently dominated by the Visa-Mastercard duopoly, we can reduce swipe fees and hold down costs for Main Street merchants and their customers. Let’s pass the Credit Card Competition Act as soon as possible."

"The average American family is being ripped off by Big Banks, who profit billions from swipe fees while hardworking Americans pay the price. It’s time to bring real competition to a credit card network market dominated by Visa and Mastercard — and drive down the cost of everyday goods," said Marshall. "The American Dream doesn’t work when the system is rigged, and this bill helps level the playing field. I’m grateful to have President Trump’s support, and I look forward to working with Senator Durbin to get this across the finish line."