Who Will Benefit Most Becomes the Latest Flash Point in the Battle Over the Illinois Interchange Law

The latest controversy about the law, which passed in June, revolves around a study from the Electronic Payments Coalition that says the largest merchants stand to see millions of dollars in interchange relief from the law, while small merchants would receive minuscule savings by comparison.

Released late Wednesday, the EPC study says Illinois merchants collectively stand to gain $118 million annually in interchange relief from the law. The top 10 merchants in the country that operate in Illinois would net more than 21% of the savings, the study says.

Amazon.com would be the biggest winner, seeing a $5.8-million reduction in annual interchange payments. The next four largest merchants—Walmart Inc., The Home Depot Inc., Verizon Communications Inc., and Apple Inc.—would see the interchange fees they pay yearly on card purchases in Illinois reduced by $3.7 million, $3.6 million, $3.4 million, and $3.1 million, respectively.

The remaining five merchants in the Top 10—AT&T Corp., Costco Wholesale Corp., CVS Pharmacy Inc., Walgreen Co., and The Kroger Co.—would see interchange reductions ranging from $2.7 million to $200,000, the report says.

By comparison, some 1.3 million small merchants in Illinois would see $56 million in annual interchange relief. If the $118 million in interchange savings were split equally among all Illinois merchants, the 10 largest merchants would each see annual savings of $2,500, the report says.

The report concludes the law will produce a windfall in interchange savings for the largest merchants, while leaving small merchants with a relative pittance.

Merchant groups counter the EPC report’s findings are skewed, as they do not include the savings small merchants would incur from not paying interchange on tips and excise taxes, which are also covered under the law.

The law, scheduled to take effect July 1, 2025, requires merchants to pay interchange on the pre-tax amount of a purchase and tips. In return, the state will cap what merchants earn for collecting sales tax on its behalf at $1,000 per month. Prior, the state paid merchants 1.75% of the sales tax collected per month.

“Merchants that receive a lot of tips and pay the most in excise taxes are small merchants,” says Doug Kantor, general counsel for the National Association of Convenience Stores, which has petitioned the court to join the lawsuit as a defendant

Excluding how much merchants will save by not paying interchange on tips and excise taxes raises serious questions about the report’s accuracy, Kantor argues.

“The [report’s] numbers aren’t accurate, because they’ve been cherry-picked to show only the largest merchants would see the biggest savings,” Kantor says. “It’s as though they want to rescore the World Series to show only runs scored by base hits as opposed to all runs scored. [The EPC] is not looking at the law as a whole. Instead, it’s using the data to support a false narrative it has created so there is a bogeyman.” 

The Illinois Retail Merchants Association for its part says the argument that the biggest merchants will receive the most savings is a foregone conclusion, since those merchants have the highest card volume and therefore pay the most in interchange.

“This study finds the obvious: businesses with the highest volume of electronic transactions will see more relief. That does not diminish the very real relief independent retailers with a high number of electronic transactions will also see under this law, including Main Street restaurants, taverns, and storefronts,” Rob Karr, president and chief executive of the Illinois Retail Merchants Association, says by email.

Karr argues it’s “no surprise financial institutions are doing all they can to undermine this law and maintain their ability to unilaterally impose exorbitant processing fees on workers’ tips and taxes on consumer purchases,” as part of a larger strategy to “distract from the fact that they, and they alone, control the fees they charge retailers and customers.”

By contrast, plaintiffs in the case—the Illinois Bankers Association, The American Bankers Association, the Illinois Credit Union League, and America’s Credit Unions, —welcome the EPC’s study, saying it shows which merchants will be winners and which losers once the law takes effect.

“The only real winners from the Illinois Interchange Prohibition Act are the nation’s corporate megastores,” Ben Jackson, executive vice president of government relations for the Illinois Bankers Association, and Ashley Sharp, legislative counsel and senior vice president of State Advocacy for the Illinois Credit Union League, say by email.

“While [merchants] will see their profits padded, consumers, small businesses, and the banks and credit unions that serve them will be left to contend with the payment chaos this misguided law will create,” Jackson and Sharp add. “Our court challenge seeks to prevent that chaos, and we remain confident the law is on our side.”

During the preliminary hearing Wednesday on an injunction to delay implementation of the law, merchant organizations that have petitioned the court to join the lawsuit as defendants were given a chance present their case. Plaintiffs were also granted an opportunity to argue their inclusion in the lawsuit.

“We believe there is no legal rationale for allowing them to intervene, and if they want to express their views, they can do so like other groups through an amicus brief,” Jackson and Sharp say.