Federal Court Decides in Favor of Illinois Restaurant Industry Against Credit Card Companies and Banks

Washington, D.C. - Today, the U.S. District Court for the Northern District of Illinois Eastern Division set a precedent by handing down a decision in favor of Illinois Attorney General Kwame Raoul, in Illinois Bankers Association, et al. vs Kwame Raoul. At issue in the lawsuit was the Illinois Interchange Fee Prohibition Act (IFPA), the first-of-its-kind state law that bars credit card companies and banks from charging interchange fees on the sales tax and tip portions of electronic transactions, ensuring that merchants are not assessed processing fees on money they collect on behalf of the state or pass through to employees.

The Restaurant Law Center, together with the Illinois Restaurant Association and the Retail Litigation Center, filed a brief in support of the Illinois Attorney General’s lawsuit.

The decision upholds the core of the IFPA, ruling that the State may enforce the law’s ban on charging interchange fees on the tax and gratuity portions of card transactions. The court rejected claims that federal banking law preempts this provision, finding that interchange fees are set by card networks—not banks—and therefore do not interfere with federal banking powers.

“This decision is a meaningful win for Illinois restaurants that have been shouldering rising costs on every transaction,” said Sean Kennedy, executive vice president of Public Affairs of the National Restaurant Association. “Just as importantly, it lays a clear legal path for other states to follow Illinois’ lead and address credit card processing fees—one of the highest and fastestgrowing costs facing restaurant owners today. This decision shows that state legislatures can take meaningful action to rein in unfair swipe fees to support local businesses.”

The interchange fee restriction will take effect statewide on July 1, 2026.

Find out more about the high cost of credit card swipe fees for restaurant operators and the efforts of the National Restaurant Association to bring down those costs here.