“Interchange is compensation because they are taking on the risk of fraud, they are monitoring for fraud, they are managing card accounts,” Charlotte Taylor, a lawyer with Jones Day representing the bankers, said in court. “Those are dollars where you are taking an equal risk of fraud, but you are not going to get compensated for that.”

But lawyers for the state argued those risks were covered by other parts of the bill.

“They are still getting plenty of interchange fees,” said Darren Kinkead, a lawyer in the Illinois attorney general’s office. “They are not doing any work for which they are not being compensated.”

The banking industry is asking Judge Virginia Kendall of the U.S. District Court for the Northern District of Illinois for a summary judgment ruling blocking implementation of the law, which was enacted in a late-night session of the Illinois Legislature in 2024.

“This was done without proper due diligence, without research, and now here we are in court having to do that due diligence that did not occur previously,” Ben Jackson, executive vice president of the Illinois Bankers Association, told reporters after the hearing.

The Legislature is not expected to take any action to repeal the bill during the ongoing veto session in Springfield. Jackson said legislative leadership wants to see what the courts decided before making any moves.  

In June, the Illinois General Assembly pushed back by a year implementation of the so-called swipe fee act, which had been set to take effect July 1.

As the law has not yet been enacted, the attorney general’s office argued today in court that the bankers had not met the standard of showing they had been damaged by it.

“They need to show that there is a credible threat that this law will be used against them,” Kinkead said.

Lawmakers decided to reduce interchange fees to soften the blow of another law that would reduce the amount of money merchants receive for collecting state and local sales taxes. That law is expected to generate $100 million in revenue for the state.

Merchants have backed the interchange law, saying it would save consumers and small businesses money.

But bankers, credit card companies and airlines such as United — which rely heavily on the profits they make from credit card partnerships — opposed the law from the outset, claiming compliance costs could run into the tens of millions for some credit card issuers.