As lawmakers advance a measure targeting interchange fees, financial institutions say the proposal could reshape how residents pay for everyday purchases — with higher costs and new frictions for businesses and consumers alike.

A rare coalition of Pennsylvania’s community banks and credit unions is sounding the alarm over legislation they say would disrupt the state’s payment system, burden small businesses and leave consumers paying more — and waiting longer — at the checkout counter.

The measure, House Bill 2090, cleared the Pennsylvania House Finance Committee this week with backing from the Pennsylvania Food Merchants Association. It would prohibit payment card networks from applying interchange fees — the fees merchants pay to process credit and debit card transactions — to the sales tax portion of a purchase, and would impose penalties for violations.

Opponents argue that what may appear to be a technical change could have sweeping consequences.

“This legislation would disrupt a payment system that works — raising costs, reducing competition, and placing new burdens squarely on the backs of small businesses and consumers,” Duncan Campbell, the president and chief executive of the Pennsylvania Bankers Association, said in a statement. He warned that by carving Pennsylvania out from established global payment practices, the bill risks driving investment away from local communities and making everyday transactions less affordable and convenient.

Financial institutions say the bill would force many small merchants to overhaul how they accept payments. According to a release from the coalition, businesses could be required to spend thousands of dollars upgrading point-of-sale systems and reworking accounting practices — potentially running separate transactions for goods and sales tax, or collecting taxes by cash or check. For some, the costs could be prohibitive.

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Kevin Shivers, the president and chief executive of the Pennsylvania Association of Community Bankers, said the proposal would tilt the playing field in favor of large retailers. “Local merchants would face operational headaches and new expenses, if they could even afford to comply, and corporate mega-stores would benefit,” he said.

Consumers, the coalition argues, would not be spared. Banks and credit unions say shoppers could encounter longer checkout times, diminished privacy and fewer rewards tied to card use. Because interchange revenue supports fraud prevention, transaction security and rewards programs, reducing it could translate into fewer points, miles and cash-back benefits.

The bill’s critics also contend that Pennsylvania would become an outlier. No other jurisdiction calculates credit and debit card transactions in the manner envisioned by House Bill 2090, they say, effectively turning the state into an “island” in the global payments system. Similar legislation promoted by large retailers has been introduced across the country, but in 2025 such measures were defeated in 26 jurisdictions and passed nowhere, according to the coalition.

Legal concerns add another layer of uncertainty. Opponents argue that the bill would likely fail to withstand judicial scrutiny, pointing to a recent court ruling involving similar legislation in Illinois.

“Interchange is what makes secure electronic payments and consumer rewards possible,” Patrick Conway, the president and chief executive of the CrossState Credit Union Association, said in a statement. He said consumers would feel the effects directly, not only in higher costs but also in reduced convenience and privacy, while credit unions’ ability to invest in their communities would be undermined.

As the bill advances, lawmakers face competing narratives: retailers pressing for relief from card fees, and financial institutions warning that the cure could prove more disruptive than the problem — reshaping how Pennsylvanians pay for everything from groceries to gas.

“Interchange is what makes secure electronic payments and consumer rewards possible. If interchange is reduced, as this measure proposes, consumers will feel it directly.”

– Patrick Conway
President & Chief Executive
CrossState Credit Union Association