Colorado Governor Jared Polis vetoed legislation that would have capped interchange fees, the charges that credit card networks levy on merchants for processing payments. The veto blocks a bill that restaurants and other small businesses backed as a way to reduce operational costs tied to card processing.
Illinois faced a different roadblock. A federal judge issued a permanent injunction against similar legislation in that state, effectively killing the effort before it gained traction. The injunction came after credit card companies challenged the law's constitutionality.
These setbacks represent major victories for Visa, Mastercard, and American Express. The card networks have mounted aggressive legal and lobbying campaigns to defend interchange fees, which typically range from 1.5 to 3 percent of each transaction. For restaurants operating on thin profit margins, these fees accumulate into millions annually across the industry.
Restaurant associations in both states had pushed hard for the legislation. They argued that interchange fees function as a hidden tax on consumers and drain resources that operators could redirect toward wages, ingredient quality, or expansion. Small restaurant owners particularly felt the squeeze, with some paying six figures annually in processing fees.
The credit card companies countered that interchange fees fund fraud prevention, security infrastructure, and rewards programs that benefit cardholders. They also warned that caps would reduce investment in payment systems and potentially drive up costs for consumers.
Polis's veto in Colorado surprised supporters who expected passage in a state generally sympathetic to small business concerns. The governor's reasoning centered on concerns about federal commerce powers and potential unintended consequences.
The dual defeats in Colorado and Illinois signal that restaurant advocacy groups face a steep climb in other states considering similar measures. Card networks possess substantial lobbying resources and legal expertise. Any future legislation attempting to regulate interchange fees will need to navigate constitutional challenges and executive skepticism. For now, restaurants continue absorbing these processing costs as a standard expense of accepting card payments.