Removing Barriers Blog

State interchange legislation
Posted February 04, 2021 by CUNA Advocacy

State legislatures across the country have introduced legislation excluding sales tax from interchange fee assessments. These bills include Mississippi - MS HB 1076/SB 2856, Oklahoma - OK SB 798, and Tennessee - TN HB 375. Interchange fees, sometimes labelled as ‘swipe fees’, are an essential part of the electronic payments system, ensuring its safety and functionality. This fee helps pay for the benefits merchants receive from accepting electronic payments, including credit unions’ investments to protect consumers’ data and prevent fraud. 

Merchants reap huge benefits from accepting payment cards, including increased sales opportunities, less fraud, guaranteed payment, and faster payment. Now, they want to shift their business costs to consumers and financial institutions in an effort to bolster their profits. 

Excluding sales taxes from interchange fee assessments fails to address the risk credit unions accept through the electronic payments system. Credit unions still bear the credit risk for the entire transaction. As a result, merchants may see their costs increase for the underlying transaction. That’s why interchange is part of the cost of doing business—the cost of accepting payment cards.  

Similar legislation has been proposed and considered in the past, and each one was uniformly rejected in its committee of reference due to harm to consumers, loss of sales tax revenue, legal deficiencies, and operational hurdles.  We will keep you posted on any new developments.  In the meantime, if you have any questions or comments, please feel free to contact Madison Rose.