DENVER — The Colorado House has approved legislation that would prohibit interchange fees from being charged on the sales-tax portion of credit and debit card transactions, sending the measure to Gov. Jared Polis for consideration amid escalating national battles over so-called swipe fees.
The bill, SB26-134, passed the House this week after clearing the Senate last week.
As the CU Daily earlier reported here, opponents of the bill, such as America’s Credit Unions and the GoWest Credit Union Association, are hopeful the governor will veto the legislation, which is similar to that set to be enacted in Illinois on July 1 and which is the subject of a lawsuit in which credit unions are among the plaintiffs.
As the CU Daily also reported, the Defense Credit Union Council (DCUC) said it has submitted a letter to the Colorado House Finance Committee raising concerns over proposed legislation it warned could disrupt the payments system and negatively affect consumers, small businesses and financial institutions.
The Proposal
Under the Colorado proposal, payment card networks and financial institutions with more than $60 billion in assets would be barred from collecting interchange fees on the sales-tax portion of transactions. The legislation also requires retailers with more than 500 employees to use resulting savings to lower consumer prices or increase employee wages and benefits, according to the Colorado General Assembly’s bill summary.
The House approved the measure by a 45-19 vote.
Supporters, including merchant and restaurant groups, argued businesses should not pay processing fees on tax revenue collected on behalf of governments. Colorado House Democratic leaders said businesses in the state paid an estimated $217 million in swipe fees tied to sales taxes in 2024, according to reporting by PYMNTS.
“This simple bill will help businesses and workers thrive and create opportunities for small retailers to compete and succeed,” Colorado House Speaker Julie McCluskie said in a statement cited by PYMNTS.
Opponents Warn of Disruption
Opponents, including banking and payments organizations, warned the legislation could disrupt national payment systems and require extensive operational changes.
The legislation arrives as federal regulators and courts continue weighing whether states can restrict interchange fee practices. Last month, the Office of the Comptroller of the Currency issued guidance asserting federal preemption authority over aspects of Illinois’ law affecting national banks and other institutions.
Brief Filed in Illinois Case
Separately, America’s Credit Unions Unions submitted a court filing with the Seventh Circuit in the case involving the Illinois Fee Prohibition Act, in which CUs are a plaintiff, arguing that the Office of the Comptroller of the Currency’s (OCC) recent order and rule related to the Illinois Interchange Fee Prohibition Act (IFPA) confirm preemption of the state legislation.
In addition, to ACU, the brief was submitted with the Illinois Credit Union League, Illinois Bankers Association, and American Bankers Association.
In the brief, the plaintiffs argue that since the IFPA interferes with federal credit unions’ powers in the same way as national banks, the OCC preemption should apply to federal credit unions as well, and that the OCC preemption actions related to the IFPA should persuade the court to issue a permanent injunction, preventing the IFPA from taking effect July 1.
The orders by the OCC explicitly provide that national banks and federal savings associations are neither subject to nor required to comply with the IFPA, the brief states.
The brief further argues that since federal agencies acting within the scope of their Congressionally delegated authority may preempt state legislation, and the OCC has exercised such authority with the orders, the IFPA should not be allowed to take effect.
