Eye On Illinois: Lawsuit challenges new law on credit card fee collection

When you swipe your credit card – at the gas station, the grocery store, the fast food joint – do you really know where all the money goes?

Clearly the answer is no, as businesses aren’t disclosing profit margins, payroll and other obligations. And knowing the total included sales tax doesn’t begin to address how those dollars funnel through the collections and disbursal system let alone how each taxing body allocates its expenditures.

But a good receipt will begin to give some of that information. The local grocery stores break down the sales tax total by the 5.5% total and the 1.75% share. Less helpful is the gas station, which doesn’t break out tax as a line item, obfuscating the per gallon rate set aside to the federal, state and county governments as well as the remainder of the sales tax that comes on top.

A grocery run in Wisconsin during a family vacation yielded a receipt that informed me of a 5.5% sales tax on some of my purchases, and if I spent enough time I could figure out what the T, N and F codes mean on each line item. Travel baseball took us to Indiana in June, where the hotel receipt broke down the occupancy tax and state tax for each night, but the doughnut shop just showed purchase subtotal and tip.

Then there’s an entirely different part of the discussion: the credit card processing itself. There are still a few businesses (and many government bodies) using a surcharge for card payments, and even fewer that offer discounts to cash customers. Far more common is charging everyone just a bit more to cover the fees owed to financial institutions for the expedience and efficiency of card-based payments.

These thoughts surfaced while reading a Capitol News Illinois summary of a lawsuit filed Thursday to challenge a new Illinois law barring fees on the tax and tip parts of any credit or debit card transaction.

“An ‘interchange fee’ is a standard charge applied over 150 billion times annually across the U.S. when a credit or debit card is swiped,” according to CNI. “No other state has enacted such a limitation on interchange fees. The provision – dubbed the Interchange Fee Prohibition Act – was included in the budgeting process to appease the state’s retailers, because the governor and Democratic lawmakers capped an existing tax discount claimed by retailers to fill a budget gap.”

The plaintiffs argue the federal government has “sole regulatory authority” over certain credit unions or banks and also calls the fees necessary. Merits of the suit notwithstanding, the dispute presents another chance to wonder how much more information each receipt could include, and whether additional knowledge might influence customer – and voter – decisions.

• Scott T. Holland writes about state government issues for Shaw Local News Network. Follow him on X @sth749. He can be reached at sholland@shawmedia.com.