A federal judge has issued a permanent injunction blocking Illinois’ first-in-the-nation law banning certain credit card interchange fees, delivering a win to banks and financial institutions that have fought the measure since it passed two years ago.

Chief Judge Virginia M. Kendall of the Northern District of Illinois issued the order on June 1, the same day state lawmakers voted to delay the law’s implementation until July 2027. The twin setbacks for the legislation — a federal court block and a legislative delay — underscore the ongoing fight between retailers and financial institutions over the cost of card transactions.

What the Law Was Supposed to Do

The Illinois Interchange Prohibition Act aimed to ban credit card companies from charging retailers fees on the tax and tip portions of customers’ bills. Processing fees currently average just over 2% per transaction, according to the National Retail Federation, and retailers argued the law would lower costs that ultimately get passed on to consumers.

Financial institutions countered that separating taxes and tips from the total transaction would be technically burdensome and costly to implement, particularly for small banks and credit unions. The judge’s injunction does not appear to apply to credit unions or Illinois-chartered banks, adding another layer of complexity.

What Happens Next

Industry groups challenging the law said in a joint statement that the court’s decision is “an important step toward preserving a consistent, nationwide framework for electronic payments” but acknowledged it “does not fully resolve the challenges created by this law.” They plan to seek review from the 7th U.S. Circuit Court of Appeals.

The Illinois Retail Merchants Association, a key proponent of the law, is “actively evaluating additional legal avenues,” President and CEO Rob Karr said. “While today’s ruling is a temporary setback, the judge’s opinion highlights serious procedural and substantive concerns about how the federal rule was adopted and its scope, so this issue is far from settled,” Karr said.

The fight has spanned the statehouse, federal courts, media airwaves and Washington. In February, a federal judge ruled the law could go into effect — a decision banks appealed. In April, the federal government moved to block the law, and the 7th Circuit vacated the earlier district judgment, setting up Kendall’s permanent injunction this week.

For Chicago businesses, the uncertainty is the hardest part. Whether you run a restaurant or a retail shop, the rules around how much you pay every time a customer swipes a card remain in flux — and likely will for months to come.

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