Interchange Fee Legislation Keeps Clearing Committee — and Dying Anyway
Interchange Fee Legislation Keeps Clearing Committee — and Dying Anyway
Every year for the better part of two decades, a version of the same bill has moved through a statehouse somewhere: a proposal to stop the card networks from charging interchange on the sales-tax and tip portion of a purchase. More than thirty such bills have been introduced across the states in that time. As of 2023 — before Illinois passed the first one — nine states already had one pending. The wave did not start in 2024. Illinois was the first success after twenty years of failure.
That history matters, because it changes what you are looking at when a new bill appears. Interchange fee legislation is not a novelty sweeping the country for the first time. It is a long-running campaign that finally found a template to copy — and a campaign whose bills reliably die in the same place, for the same reason, over and over.
If you run a business and read a headline that your state is “moving to ban swipe fees on taxes,” the useful question is not whether the bill exists. It is also worth knowing how little those swipe fee savings actually amount to even where a bill passes. It almost always exists. The useful question is where in the process it will die — and on that, the record is unusually clear.
Committee Is Not the Obstacle. Everything After It Is.
The intuition most people have is that these bills stall in committee — introduced, referred, quietly forgotten. The record says the opposite. Interchange fee legislation clears committees fairly regularly. Where it dies is later: on chamber floors, in the opposite chamber, at a governor’s desk, or in federal court.
Pennsylvania is the cleanest illustration. A swipe-fee-relief bill was reported out of the House Finance Committee, then stalled on the floor. The same thing had happened one session earlier with a nearly identical bill from the same sponsors — out of committee, then dead. Twice, the merchant coalition won the committee argument and lost everything after it.
The pattern repeats across states. In Colorado, a bill passed the full House in 2025 and was killed in a Senate committee; a second attempt passed both chambers in 2026 and was vetoed by the governor. In Arizona, a bill reached a third reading. In Oklahoma, a bill failed on a committee vote held on the last possible day to advance it. Illinois is the only state where one became law — and even there it was delayed twice and then largely blocked by a federal court injunction.
A tracker can tell you a bill is “introduced” or “advancing.” It cannot tell you that these bills tend to survive the committee stage and fail on the floor or at the governor’s desk — which is exactly what a business owner deciding whether to expect real change needs to know. The merit argument tends to win early; the political and legal fight comes later.
Why So Many Die: A Federal Preemption Problem
The reason interchange fee legislation is so hard to enact is not that legislators dislike it. It is that most of these bills run into federal banking law. National banks — which issue a large share of the credit cards in circulation — are governed by the National Bank Act, and federal courts have long held that states cannot easily regulate how national banks price their products. When Illinois enacted its law, a federal court quickly enjoined enforcement against national banks, federally chartered savings associations, and out-of-state banks, leaving the law standing against only a narrow slice of issuers.
That ruling is the wall every other state now has to design around. And several are trying.
Even the one enacted law is mostly enjoined. Reading that a state “banned interchange on taxes” is not the same as that ban being in force. Illinois’ law is delayed to 2027 and, as written, cannot currently be enforced against the banks that issue most cards. A headline is not an effective date.
Regulate the Network, Not the Bank
The most interesting development in interchange fee legislation right now is a drafting strategy, not a bill. Several states have independently converged on the same idea: if you cannot regulate national banks, write the law so it applies to the card networks instead — Visa and Mastercard — which are not banks and do not enjoy the same federal shield.
Pennsylvania’s bill enforces its rules only against the networks, through the state attorney general, and explicitly excludes banks and credit unions. Tennessee, Oklahoma, and one of New York’s bills use the same networks-only structure. Four states, arriving at the same workaround separately, because they all watched Illinois lose the bank fight and redrew the target.
Whether it works is untested — and there is reason for doubt. The Illinois injunction reached the networks too, not just the banks, on the theory that the networks are the ones setting the interchange schedules the law tries to reach. If that reasoning holds elsewhere, the most popular workaround in the country may already have been foreclosed. That tension — the strategy most states are betting on may not survive the courtroom that inspired it — is the part of this story that has real consequences and almost no coverage.
The Numbers, From the Records Themselves
Most interchange fee legislation is sold on the promise of merchant savings, so it is worth being honest about the size of the prize, because the legislative debate rarely is. A tax carve-out is real money in aggregate and modest per merchant. A Texas legislative committee report put concrete figures on it: a small merchant with about $1 million in annual card sales pays roughly $30,000 a year in swipe fees — of which nearly $2,500 is paid solely to process the tax portion of those sales. Statewide, one analysis cited in the same record estimated Texas merchants paid over half a billion dollars in swipe fees on sales tax in a single year.
The other side of the ledger is also in the record. A Texas state agency, in an official fiscal note, estimated that the programming cost to itemize and exclude the tax portion of each transaction would outweigh the savings the bill would produce for that agency. And an industry group opposing the laws has argued that after the Illinois injunction, roughly ninety percent of card transactions there fall outside the law, that the annual saving to an individual merchant is only a few dollars, and that compliance costs each merchant hundreds up front.
For most small businesses, the honest read is that a tax carve-out, even if it survives, is a small structural improvement — not a fix for an expensive processing rate. The far larger lever is almost always the markup on your own statement, which no legislature controls and which you can address today. That is the number worth pulling.
Not All of These Bills Do the Same Thing
Interchange fee legislation gets discussed as one idea, but the bills fall into three distinct types, and only one of them touches what most merchants care about. The large majority are tax-and-gratuity carve-outs — the Illinois model, removing interchange from the tax and tip portion of a sale. A handful are antitrust-and-disclosure bills, which bar fee-fixing and, more usefully, would require networks to disclose swipe-fee and network-fee rates to merchants. A few are network-conduct bills that regulate practices like fees on disputed transactions.
The distinction matters for a reason the coverage misses: only the carve-out model changes what a merchant pays, and only slightly. The disclosure model is the one that would make processing costs visible — which, for a merchant trying to tell a real cost from a markup, is the more valuable change and the one least likely to pass, because visibility is precisely what the current pricing model depends on obscuring.
Frequently Asked Questions
Only Illinois has enacted a law — the Interchange Fee Prohibition Act — and even that is delayed to 2027 and largely blocked by a federal court injunction against the banks that issue most cards. Many other states have introduced similar bills, but as of now none has one in force. You can see the current state-by-state picture on our state interchange fee laws tracker.
They usually clear committee — the merchant argument tends to win on the merits — and then die later on a chamber floor, in the opposite chamber, at a governor’s desk, or in federal court. The core obstacle is federal banking law: national banks are hard for states to regulate, so most bills get enjoined or watered down even when they pass.
Probably far less than the headline suggests. Most bills only remove interchange from the tax and gratuity portion of a sale, which is a small fraction of your total fees. The larger lever is almost always the markup your processor adds on top of interchange — which no law controls and which a statement review can show you today.
Stop Waiting on the Legislature. Pull Your Statement Instead.
No interchange fee legislation is going to lower your rate this year — but the markup your processor stacked on top of interchange is on your statement right now, and that part you can change today. Send Brookside one recent statement and we’ll calculate your true effective rate and show you which fees are real cost and which are markup. Learn more about payment processing consumer protections from the CFPB.
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