Credit Cards by Nick Youngson is licensed under CC BY-SA 3.0
On July 13th, 2026, Americans for Tax Reform submitted a letter to the Massachusetts Special Commission on the Future of Payments, urging the Commission to avoid proposing restrictions on interchange fees.
Interchange fees, known as swipe fees, are fees paid on electronic payment transactions. They fund fraud protection for cardholders, compensate banks for processing payments, and cover the risk banks take on when they extend a line of credit. Prohibiting or carving up those fees does not make the underlying costs disappear. Those costs merely get relocated. In a dual sided market facing consumers and merchants, both parties benefit from seamless, convenient, and secure payments that cash payments cannot provide.
Other states have experimented with interchange fee adoption, and the results, or lack thereof, speak for themselves. In Illinois, the Illinois Interchange Fee Prohibition Act (IFPA), passed in 2024, which bars banks and card networks from collecting interchange on the tax and gratuity portions of an electronic transaction. Point of Sale systems do not separate charges into merchandise, tax, and tip components at the moment of authorization. Merchants would have been left with two options for their customers: run the tax and gratuity as a separate transaction or take cash or check. Everyday purchases would have devolved into two swipes or a trip to the ATM. Thankfully, Illinois never got that far.The law was tied up in litigation after the Office of the Comptroller of the Currency (OCC) intervened, citing contradictions with the National Bank Act.
Officials outside Illinois looked at the same law and reached the same conclusion. The OCC preempted the IFPA as applied to national banks, warning that the law “would create a complex, potentially unworkable, and destabilizing standard for national banks, Federal savings associations, and the nation’s payment card systems,” and that “such effects could be exacerbated to the extent other states impose similarly unworkable or conflicting standards.” In Colorado, Governor Jared Polis vetoed a nearly identical bill in June, writing that “the bill presents too much legal risk to Colorado’s business environment and consumers, with limited upside for our small businesses, for me to be comfortable signing.”
The empirical case against capping interchange fees is also indicting. In 2010, the Durbin Amendment capped debit card swipe fees for large banks based on the idea that merchants would pass the savings on to customers. That premise did not hold up. The Federal Reserve Bank of Richmond found that roughly 98 percent of merchants either held their prices steady or raised them, while only about 1 percent lowered them. Further research done by the Federal Reserve discovered the Durbin Amendment caused monthly fees on noninterest checking accounts to rise by about 20 percent.
Massachusetts now confronts itself with a decision. After 16 years of Durbin Amendment dysfunction and two years of watching the IFPA collapse under its own weight, the policy evidence is abundantly clear that interchange fee caps do not work. Massachusetts should learn from the real-world lessons of interchange fee restrictions and decline to adopt such regulation.
A copy of the letter can be read here.
