AFSA opposes interchange fee bills in Maryland and Washington

The American Financial Services Association (AFSA) has voiced its opposition to proposed bills in Maryland and Washington that aim to restrict interchange fees on gratuity and sales tax portions of electronic transactions. The bills, known as Maryland HB 29 and Washington SB 5070, are inspired by the Illinois Interchange Fee Prohibition Act (IFPA), which has faced controversy and legal challenges.

According to AFSA's testimony, similar legislative efforts have been unsuccessful in 29 states over the past 17 years. The IFPA is currently under legal scrutiny, with a federal court issuing a partial preliminary injunction against it. This decision was based on potential violations of the National Bank Act and concerns from the Office of the Comptroller of the Currency (OCC). The OCC has expressed worries that such laws could increase fraud risks, limit consumer services, and disrupt the payment system.

The proposed legislation in Maryland and Washington presents financial institutions with two difficult choices: either absorb the costs associated with processing retailers’ sales tax and gratuities or stop processing these parts of electronic transactions altogether. Such outcomes would compel consumers to resort to cash or checks, offering no advantages to consumers, businesses, or financial institutions.

Given these significant legal and economic issues, AFSA is urging policymakers in both states to dismiss HB 29 and SB 5070. For those interested in further details or AFSA’s complete testimonies, they can be accessed through the direct advocacy section on AFSA’s website.