The Colorado House yesterday passed a bill prohibit the collection of interchange fees for sales taxes. Following state Senate passage last week, the bill — modeled after an Illinois law that has been challenged in court by the American Bankers Association and others — now goes to Gov. Jared Polis’s desk.
The proposed law is backed by the retail industry. If Polis signs it, it would prohibit the payment card networks and financial institutions with more than $60 billion in assets from charging interchange fees on sales taxes. It was also amended to mandate that retailers with at least 500 employees use the savings to reduce prices or boost their employee wages and benefits.
The Colorado bill is similar to the Illinois Interchange Fee Prohibition Act, or IFPA, which bans banks, payment networks and other entities from charging or receiving interchange fees on the portion of a debit or credit card transaction attributable to tax or gratuity. ABA, the Illinois Bankers Association and others filed a lawsuit against the IFPA, but a district court judge upheld most of the law in a decision earlier this year. The plaintiffs have appealed the ruling.
The Colorado vote comes a week after the Office of the Comptroller of the Currency announced an interim final rule confirming the longstanding powers under federal law for national banks to charge certain fees. The OCC also issued an interim final order stating that national banks and federal thrifts are neither subject to nor required to comply with IFPA.
Jen Waller, president and CEO of the Colorado Bankers Association, said CBA was disappointed in the vote.
“Colorado has worked hard to build a reputation as a state that welcomes innovation, technology, and economic growth,” she said “Unfortunately, this legislation risks creating the opposite legacy — one marked by regulatory uncertainty, costly litigation, and unintended consequences for consumers and businesses alike.
“Our coalition is now focused on the importance of a gubernatorial veto,” Waller added. “Since this proposal was first introduced, the legal and regulatory landscape has shifted significantly, including the Office of the Comptroller of the Currency’s April 24 ruling affirming federal authority in this area and ongoing unresolved litigation surrounding the Illinois Interchange Fee Prohibition Act before the 7th Circuit Court of Appeals. Advancing a first-in-the-nation policy creates uncertainty that could undermine Colorado’s position as a destination for innovation, technology investment, tourism, and business growth.”
