Illinois interchange fee law (IFPA): the 2026 status, in plain English

The 40-second answer

The Illinois Interchange Fee Prohibition Act (IFPA) would bar banks, card networks, and processors from charging interchange fees on the tax and tip portions of a card sale, and it limits how some payment-card data can be used. It was scheduled for July 1, 2026 — but on June 1, 2026 the Illinois General Assembly voted to push it back a year, to July 1, 2027. The same period brought federal court rulings that permanently blocked enforcement against national banks and federal savings associations, while leaving Illinois state-chartered banks and credit unions still subject to it. Net effect for merchants today: nothing in the IFPA is operative, and the outcome is still uncertain.

What the law was trying to do

Today, when a customer pays a $100 restaurant tab that's $90 food, $8 tax, and a $2 add-on, interchange is assessed on the whole amount — including the tax. The IFPA's core idea was simple: stop the assessment of interchange on the tax and gratuity portions, since those aren't the merchant's revenue. It also added a data-use restriction on certain payment-card transaction information. It does not create a fee you charge customers; it targets the fee structure between the banks and processors. If you want a refresher on where these fees come from in the first place, start with interchange explained.

Why July 2026 came and went

Two things happened almost at once. First, the banking industry sued, arguing federal law preempts a state from regulating interchange on national banks. Courts agreed in part: a December 2024 preliminary injunction blocked enforcement against national banks and federal savings associations, a February 2026 ruling upheld the interchange-on-tax-and-tip ban as not preempted while permanently enjoining the data-use limits against federally chartered institutions, and by June 1, 2026 the court granted a permanent injunction against national banks, federal savings associations, and certain federally protected out-of-state banks. Second, on that same day, Illinois lawmakers voted to delay the start date to July 1, 2027 — relieving the immediate compliance pressure on everyone while the appeals play out.

Who would actually be covered

This is where it gets messy, and why it matters less to your day-to-day than the headlines suggest. Because the injunctions turn on who charters the bank, the law — if and when it takes effect — would land unevenly: Illinois state-chartered banks and credit unions remain inside its scope, while national banks and federal savings associations have been carved out by the courts. Most card transactions flow through large national networks, so a fragmented, charter-by-charter rule is hard to apply at the register. Expect more appellate litigation before any of it is settled.

What it means for your business right now

Practically, nothing changes on your statement in 2026 because of the IFPA. Don't restructure anything, don't wait on it to lower your costs, and be skeptical of any processor who pitches you a product "because of the new Illinois law" — it isn't in force. The useful takeaway is bigger than one state: lawmakers and merchants alike are pushing back on interchange because card fees are one of the largest line items a small business doesn't control. The smart move isn't to wait for a law — it's to read your own statement and fix what you can control. See how to read your merchant statement and the hidden fees most owners miss.

The lever you actually control

You can't legislate your interchange away, but you can change how your processing is structured so those fees stop coming out of your margin. With a properly built dual-pricing or zero-cost program, the cost of card acceptance is offset at the point of sale — legally, with both prices shown clearly — which takes your effective processing cost toward zero no matter how the Illinois case ends. That's a change you can make this month, in any state, instead of waiting on a courtroom. See how zero-cost processing works, then look at processing and the packages.