The IFPA’s fate remains unclear.
Illinois has delayed the effective date of the Illinois Interchange Fee Prohibition Act (IFPA) by one year to July 1, 2026. The fate of the IFPA remains unclear as litigation challenging the bill has yet to be resolved.
The IFPA prohibits the collection of interchange on sales taxes, excise taxes, and tips, if a merchant elects to separate out those charges from the price of a purchase. It also prohibits participants involved in an electronic payment transaction (except the merchant) from transferring or using data from that transaction except to facilitate or process the transaction, or as required by law. Each violation of the IFPA is subject to a $1,000 penalty per transaction for the merchant acquirer.
In August 2024, the American Bankers Association (ABA), America’s Credit Unions, the Illinois Banker Association and the Illinois Credit Union Leage filed a suit seeking an injunction. In December 2024, the US District Court granted a preliminary injunction blocking the enforcement of the IFPA on nationally chartered banks and federal savings associations, finding that plaintiffs’ claims that the IFPA interferes with the National Banking Act and the Homeowners’ Loan Act had a high likelihood of success. In February 2025, the Court found that the IFPA is also likely preempted under the Riegle-Neal Interstate Banking and Branching Efficiency Act and extended the injunction to cover out-of-state banks doing business in Illinois.
According to the Electronic Transactions Association (ETA), under this preliminary injunction about 90% of card transactions in Illinois are exempt from the IFPA. In March 2025, the plaintiffs filed a motion seeking to have the preliminary injunction extended to cover federal and state credit unions, and the payment card networks.
Other states are watching closely as the IFPA has inspired similar legislation exempting merchants from paying interchange on sales tax and tips. Bills have been introduced in Alaska, Maryland, Massachusetts, New York, Washington and the District of Columbia.
For more information on the IFPA delay, see this National Law Review article. For more information on other states pursuing legislation similar to IFPA, see this Digital Transactions article.
If your business is looking to better manage your merchant account or reduce fees, we’re here to help. We fix and monitor your existing merchant account, and we bring that money back to you. No need to change processors or add a project to your team’s already hectic workload. Schedule a consultation today.
Verisave is a third-party cost-reduction firm specializing in merchant accounts and credit card processing fees.
Verisave is not a payment processor, and is not affiliated with any processors, card brands, or banks.
Verisave has more than 20 years of experience optimizing and monitoring the credit card processing industry.