Opinion: Use a credit or debit card? Then you won't like this deal.

Ashley Sharp

By: Illinois Credit Union League Senior Vice President Ashley Sharp and Illinois Bankers Association Executive Vice President Ben Jackson

While most Illinois consumers enjoyed the Memorial Day weekend, Illinois legislators were busy hammering out a budget deal to fund our state government for the coming year. Buried in that budget was a novel, nonbudgetary giveaway to corporate retailers like Home Depot and Walmart: Retailers may no longer be charged a payment processing fee on the taxes and gratuities on consumers’ purchases.

This hasty deal will cost small retailers money and disrupt transactions for Illinois consumers while not raising a cent to fund government services. Conversely, it may cost state and local governments tax dollars. Perhaps most disturbing, this bill raises privacy concerns for consumers.

As passed, section 150 of H.B. 4951 requires the electronic payment industry to “look inside” all Illinois customer electronic transactions to separate elements of the transaction and distinguish between merchandise or services being purchased and taxes that are legally being imposed by the state of Illinois on those transactions, as well the gratuities added to transactions. The payment industry has never had to engage in this level of inquiry before, raising privacy concerns for consumers.

Currently, interchange fees are charged based on a simple number: the total amount of a card transaction. This law creates multiple layers of complexity by requiring payment transactions to include detailed information about each tax charged by a local jurisdiction in Illinois as well as gratuities. Implementation will cause a system that currently operates on interstate and global standardization to process transactions in mere milliseconds to grind to a near halt.

This potential change in law harms the U.S. payments system by fundamentally altering how payments are processed while garnering no additional revenue for our state government necessities. Instead, it will provide a benefit to the largest retailers — predominantly headquartered outside Illinois — while imposing burdensome implementation costs on Illinois’ small retailers and financial institutions and making seamless card payments a thing of the past for Illinois consumers.

Consumers in our country enjoy a variety of credit and debit card products to meet their specific needs and enjoy the convenience of near-instantaneous payments online and in our Illinois-based brick-and-mortar merchants. Section 150 of HB 4951 will disrupt that seamless consumer experience.

While we believe that much of this law is unimplementable, if it were somehow implemented it would force local merchants and their financial institutions to employ antiquated, costly, and inconvenient workarounds that would complicate and slow down commerce in Illinois. Online merchants may have an even more disruptive experience, rendering many transactions impossible to complete for Illinois consumers.

A change to the payment system of this magnitude involving and impacting more than seven million Illinois card holders, hundreds of thousands of Illinois merchants, and thousands of card-issuing banks, credit unions, and processors should not have been part of a hasty deal, and it certainly should not have been decided exclusively in Springfield when such a change have ripple effects on global commerce.

With the legislation sitting on Governor J.B. Pritzker’s desk, we respectfully asked him to veto the Interchange Prohibition Act contained in Section 150 of HB 4951 and consider further study of this issue in a manner that does not disrupt Illinois commerce and ensures that all interested parties — including Illinois consumers, small businesses, and local financial institutions — have an opportunity to be heard.

Ashley Sharp, senior vice president of state advocacy and legislative counsel at the Illinois Credit Union League and Ben Jackson, executive vice president of the Illinois

Bankers Association, write on behalf of the Illinois Bankers Association, America's Credit Unions, the Illinois Credit Union League, the Card Coalition, the Electronic Payments Coalition and the Innovative Payments Association.

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