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The Electronic Payments Coalition late Wednesday filed an Amicus brief on behalf of the plaintiffs in a lawsuit challenging the Illinois Interchange Fee Prohibition Act.
The lawsuit, brought by Illinois Bankers Association, Illinois Credit Union League, American Bankers Association, and America’s Credit Unions and filed last month in the United States District Court of Northern Illinois, seeks to overturn the law, which was passed as part of Illinois’s budget for the coming fiscal year.
In the document, the EPC contends the law is “a first of its kind piece of legislation” that “unilaterally restructured interchange fees” and is “an example of troubling self-dealing by a state government.”
The EPC states that it agrees with the plaintiffs that the Illinois Interchange Fee Prohibition Act “is preempted by federal law which ensures that the national payment system is not subject to a balkanized regulatory regime.”
An Amicus brief, or friend-of-the-court brief, is a legal document filed by an individual or organization that is not a party to a case but has an interest in the outcome. The brief is intended to provide the court with outside information, expertise, or arguments that can help the court make a decision in the case.
In addition to preempting federal law, the EPC argues the Illinois Interchange Fee Prohibition Act “raises serious concerns under the Fifth and Fourteenth Amendments’ requirement that states give just compensation for the benefits they receive from the infrastructure they access to increase revenue.”
The Illinois Interchange Fee Prohibition Act, which is scheduled to go into effect July 1, 2025, exempts Illinois merchants from paying interchange on sales tax and gratuities linked to credit and debit card transactions. In exchange, the state will cap what merchants earn for collecting sales tax at $1,000 per month.
In a statement, EPC Executive Chairman Richard Hunt said: “The new law in Illinois puts [the electronic payments] system at risk by creating credit card chaos which will predominately fall on the smallest businesses while the largest mega-stores reap any perceived benefit.”
Hunt added that the United States economy is “built and dependent upon electronic payments” and that the system is often taken for granted because it is “hassle-free and secure.”
Filing such a brief this early in a lawsuit, before a ruling has been made in the case, is rare, according to legal and payments experts.
“It is more common to see these briefs filed in appellate court,” says Doug Kantor, executive committee member for the Merchants Payment Coalition and general counsel for the National Association of Convenience Stores.
Whether the brief will be effective at swaying the court’s decision is a coin toss, as there are many subjective factors involved, such as the quality of the argument, what’s being asked of the court, and whether the judge chooses to accept the brief.
“A well-reasoned Amicus brief from a credible party is helpful, but certainly not dispositive,” Eric Grover, principal at payments consultancy Intrepid Ventures, says by email. “Ultimately, the suit will be won or lost based on its legal merits.”
The MPC’s Kantor counters the brief is unlikely to have much influence with the court because of the merits of the Illinois law. “I doubt this will be as helpful as [the EPC] thinks, “Kantor says. “The Illinois law is not a pre-emptive law.”
Grover adds that the best outcome would be for the Illinois’s legislature to repeal the law as it “would hurt consumers, merchants, banks, and the payments industry, be enormously expensive, and take at least [three] to [five] years to implement, and set the stage for a patchwork of customized interchange price controls at the state level.”
