DENVER—Colorado lawmakers have taken the next step in the growing state-by-state fight over interchange, with the state Senate on Monday advancing legislation that would bar payment card networks from charging swipe fees on the sales tax portion of card transactions—an approach credit unions have warned could create many of the same operational and legal headaches now at the center of Illinois’ closely watched swipe-fee battle.
According to CBS News, the bill advanced Monday and now heads to a final Senate vote, with supporters arguing it would help restaurants and other merchants keep more revenue, while opponents—including credit unions and other financial groups—warn it could raise fraud risk, distort pricing and create uneven treatment under state law.
As CUToday.info recently reported, Colorado’s SB 26-134 would prohibit payment card networks from including sales tax in the base used to calculate interchange fees, while exempting smaller issuers—including credit unions—through an asset threshold and offering compliance options such as excluding tax at settlement or rebating the tax-related portion afterward. That has made the bill especially notable for credit unions because, even with the issuer exemption, the broader system changes mirror the same kind of carve-out-driven policy experiment now roiling Illinois, where the Interchange Fee Prohibition Act is set to take effect July 1 unless courts or regulators intervene.
The Illinois fight remains the bigger warning sign for credit unions. As CUToday.info has been reporting, the Office of the Comptroller of the Currency has now moved to preempt Illinois’ law for national banks, intensifying pressure on NCUA over whether it will act similarly for federal credit unions. Colorado’s bill is narrower than Illinois’ law, but it still underscores the same growing threat: more states are testing ways to strip interchange from pieces of a transaction, forcing payment networks, issuers and merchants into complicated compliance regimes that the industry argues could increase costs and weaken fraud protections.
CBS reported that supporters say swipe fees can consume 3% to 4% of a transaction and that Colorado Restaurant Association members told lawmakers the savings could be redirected to wages, repairs and upgrades. But critics quoted by CBS, including Northern Colorado Credit Union President and CEO Meagan Barrett, argued that reducing interchange-related revenue tied to card programs would ultimately undercut fraud prevention and shift costs elsewhere.