Banks Clash With Illinois at Hearing on Credit Card Swipe Fees

Illinois defended its law eliminating payment card interchange fees at a federal district court hearing Wednesday, arguing that banks lack standing to seek an injunction against its enforcement.

Illinois banks claim the law could cost them billions of dollars in fines and implementation costs.

Lawyers for the banks said federal laws preempt the state from enacting and enforcing the Illinois Interchange Fee Prohibition Act—the first of its kind among states. They further argued the fees not only pay to validate payments but also fund fraud-prevention efforts and help extend credit to borrowers.

The act, scheduled to enter into force July ...