Banks and credit unions that oppose a fresh Illinois law that bans some credit card fees argued before a federal judge on Wednesday that the legislation would cost financial organizations and is preempted by existing national rules for state, federal, and out-of-state businesses.
Following months of issues from the finance sector that Illinois ‘ first-in-the-nation law may harm their business and cause problems for customers, the reading on a demand for a preliminary injunction was held. The complaint names Illinois Attorney General Kwame Raoul as defendant in a lawsuit filed in U.S. District Court in Chicago.
The complex legal issues presented by the situation prompted U. S. District Judge Virginia Kendall at one place to visit out “law class geekiness” in the claims from counsel for the defendants, which include the Illinois Bankers Association, the American Bankers Association, America’s Credit Unions and the Illinois Credit Union League.
The attorney general’s argument that the case should be dismissed is mostly based on legal problems.
Following a separate tax increase on their businesses that was included in the state income plan, retailers who wanted the credit card payment law were pushing it during the spring. Retailers claim that the law, which wo n’t go into effect until July 1, will lower costs and that the concerns about inconvenience to banks are exaggerated.
Credit card companies and other financial institutions now levy a charge on retailers when they use their cards, based on the total amount paid, including goods, taxes, and tips. With a goal of lowering the fees that credit card companies can charge retailers, the new law would prohibit fees on customers ‘ tax or tip receipts.
Lenders contend that implementing that change by July 1 would be costly and stressful.
An attorney for the plaintiffs said Wednesday that and, in principle, a coding change may be enacted for point-of-sale program, companies would need to find out a program that takes into account different taxes jurisdictions, for example.
According to counsel Charlotte Taylor, those changes could lead to a “waterfall result” because “many financial institutions may be involved in each deal” and may require “years and hundreds of millions of dollars” in the long run.
And if those concerns are n’t addressed, even smaller banks may face stiff penalties because the rules would increase fines per invoice, Taylor said.
” Technical name: people are freaking out”, Taylor said of those businesses.
Additionally, according to banks and credit card issuers, it might lead to a system where customers may need to click multiple times for some transactions, adding more document for small businesses.
The government’s opponents got a raise in recent weeks from the federal Office of the Comptroller of Currency, a bureau within the U. S. Department of the Treasury, which filed an amicus brief calling the Illinois law “ill-conceived, very strange, and generally impossible”.
” In short, the ( Illinois law ) constitutes both bad policy and an unlawful interference with federally granted powers”, the brief said.
Darren Kinkead, arguing for the attorney general’s office, said the law should be allowed to play out.
” If it turns out that it’s really as bad as everyone is saying, then that will work itself out through the democratic process,” he said.
Following the election the following month, Springfield’s state lawmakers are scheduled to hold a brief veto session. The Illinois Bankers Association’s Ben Jackson stated that he believes legislators are becoming more concerned about the potential effects of the law on their constituents, but that” there’s not a lot of time to do too much, generally” during the fall session.
Gov. The credit card issue is “certainly something I think we’re always willing to discuss, revisit, and have a conversation about,” according to JB Pritzker earlier this year, who claimed he did n’t anticipate any changes to the law.
Although the new Illinois law is independent of the federal legislation on interchange fees that was proposed by U.S. Sen. Dick Durbin, it has an impact on Visa, Mastercard, and other significant financial services firms.
Judge Kendall did not provide a date for her ruling, but Jackson stated that plaintiffs hope to receive an answer on their request for an injunction within a few weeks.
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