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H 8212Banking & Investments

Commercial Law - General Regulatory Provisions - Interchange Fee Restriction Act

This bill bans credit card companies and banks from charging merchants transaction fees on the sales tax portion of purchases.

Held for study
Population
Affected
35
Email Legislator
Introduced Feb 27, 2026Committee House Corporations

Plain-English Summary

This legislation, known as the "Interchange Fee Restriction Act," prohibits credit card issuers, banks, and payment processors from charging merchants "interchange fees" (often called swipe fees) on the sales tax portion of a transaction. To qualify for this exemption, merchants must transmit the specific tax amount during the transaction settlement or submit documentation within 180 days. The bill mandates that issuers refund any fees charged on tax amounts and prohibits them from raising fees on the rest of the transaction to offset the loss. Violations are considered deceptive trade practices subject to fines.

For younger readers

When you buy a toy at a store using a credit card, the store has to pay a small fee to the bank for letting them use the card system. Right now, the store pays that fee on the total cost, which includes the price of the toy plus the tax. This new law says that banks are not allowed to charge that fee on the tax money. The store will only have to pay the fee on the price of the toy itself, which helps the store save money.

Who & Where It Applies

Impacted groups
MerchantsBanksCredit Card ProcessorsPayment Card NetworksConsumers
Impacted communities
All

Constitutional & Fiscal Check

Moderate risk

Low to Moderate. While states have broad police powers to regulate business practices and consumer protection, the provision explicitly prohibiting banks from altering other fees to circumvent the law (Section 6-26.2-3(d)) could be challenged as a violation of the Contracts Clause or the Commerce Clause. Opponents might argue this specific "anti-circumvention" clause acts as an unconstitutional price control that interferes with interstate commerce and private pricing agreements.

Estimated cost
None
Estimated revenue
Amount unknown

Bill Analysis

Both viewpoints
For Progressives
  • Protects small businesses and local merchants from excessive fees charged by large financial institutions, allowing them to retain more revenue.
  • Prevents corporate banks from profiting off the collection of public funds (taxes) intended for community services and government operations.
  • Establishes strong consumer protection standards by classifying violations as deceptive trade practices, holding powerful financial entities accountable.
  • May unintentionally lead banks to reduce credit card rewards programs or increase fees on consumer accounts, which could disproportionately affect lower-income individuals.
  • Creates an administrative burden for smaller merchants who may not have the technical infrastructure to easily separate and report tax data during transactions.
  • Focuses on business-to-business financial regulations rather than directly mandating that the savings be passed on to consumers in the form of lower prices.
For Conservatives
  • Reduces the cost of doing business for merchants by eliminating fees on government-mandated tax collections, thereby supporting business viability.
  • Prevents the "tax on a tax" scenario where businesses are forced to pay private fees on money they are collecting solely for the government.
  • Ensures that tax revenue collection remains neutral and does not serve as a profit center for third-party financial intermediaries.
  • Constitutes government interference in the free market by dictating price terms and fee structures in private contracts between banks and merchants.
  • Imposes strict price controls by prohibiting banks from adjusting other fees to manage their risk and profitability, violating free enterprise principles.
  • Creates excessive government overreach with heavy civil penalties ($1,000 per transaction) that could unjustly punish businesses for technical errors.

Votes

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Full Bill Text

Changes to existing Rhode Island law · 77 additions

SECTION 1. Title 6 of the General Laws entitled "COMMERCIAL LAW — GENERAL REGULATORY PROVISIONS" is hereby amended by adding thereto the following chapter: 6-26.2-1. Short title. This chapter may be known and cited as the "Interchange Fee Restriction Act". 6-26.2-2. Definitions. As used in this chapter:

(1) "Acquirer bank" means a member of a payment card network that contracts with a merchant for the settlement of electronic payment transactions. An acquirer bank may contract directly with merchants or indirectly through a processor to process electronic payment transactions.

(2) "Authorization" means the process through which a merchant requests approval for an electronic payment transaction from the issuer.

(3) "Clearance" means the process of transmitting final transaction data from a merchant to an issuer for posting to the cardholder's account and the calculation of fees and charges, including interchange fees, that apply to the issuer and the merchant.

(4) "Credit card" means a card, plate, coupon book, or other credit device existing for the purpose of obtaining money, property, labor, or services on credit.

(5) "Debit card" means a card or other payment code or device issued or approved for use through a payment card network to debit an asset account, regardless of the purpose for which the account is established, whether authorization is based on a signature, a personal identification number, or other means. Debit card includes a general use prepaid card, as defined in 15 U.S.C. 16931·1. Debit card does not include paper checks.

(6) "Electronic payment transaction" means a transaction in which a person uses a debit card, a credit card, or other payment code or device issued or approved through a payment card network to debit a deposit account or use a line of credit, whether authorization is based on a signature, a personal identification number, or other means.

(7) "Interchange fee" means a fee established, charged, or received by a payment card network for the purpose of compensating the issuer for its involvement in an electronic payment transaction.

(8) "Issuer" means a person issuing a debit card or credit card or the issuer's agent.

(9) "Merchant" means a person that collects and remits a tax.

(10) "Payment card network" means an entity that:

(i) Directly or through licensed members, processors, or agents, provides the proprietary services, infrastructure, and software to route information and data for the purpose of conducting electronic payment transaction authorization, clearance, and settlement; and

(ii) A merchant uses to accept as a form of payment a brand of debit card, credit card, or other device that may be used to carry out electronic payment transactions.

(11) "Person" means any individual, firm, public or private corporation, government, partnership, association, or any other organization or entity.

(12) "Processor" means an entity that facilitates, services, processes, or manages the debit or credit authorization, billing, transfer, payment procedures, or settlement with respect to any electronic payment transaction.

(13) "Settlement" means the process of transmitting sales information to the issuing bank for collection and reimbursement of funds to the merchant and calculating and reporting the net transaction amount to the issuer and merchant for an electronic payment transaction that is cleared.

(14) "Tax" means any sales and use tax or excise tax imposed by the state or a municipality.

(15) "Tax documentation" means documentation sufficient for the payment card network to determine the total amount of the electronic payment transaction and the tax amount of the transaction. Tax documentation may be related to a single electronic payment transaction or multiple electronic payment transactions aggregated over a period of time. Tax documentation includes, but is not limited to, invoices, receipts, journals, ledgers, and tax returns filed with the department of revenue or local taxing authorities. 6-26.2-3. Interchange fees on taxes prohibited.

(a) An issuer, a payment card network, an acquirer bank, or a processor shall not receive or charge a merchant any interchange fee on the tax amount of an electronic payment transaction if the merchant informs the acquirer bank or its designee of the tax amount as part of the authorization or settlement process for the electronic payment transaction. The merchant shall transmit the tax amount data as part of the authorization or settlement process to avoid being charged interchange fees on the tax amount of an electronic payment transaction.

(b) A merchant that does not transmit the tax amount data in accordance with subsection

(a) of this section may submit tax documentation for the electronic payment transaction to the acquirer bank or its designee no later than one hundred eighty (180) days after the date of the electronic payment transaction, and within thirty (30) days after the merchant submits the necessary tax documentation, the issuer shall credit to the merchant the amount of interchange fees charged on the tax amount of the electronic payment transaction.

(c) This section does not create liability for a payment card network regarding the accuracy of the tax data reported by the merchant.

(d) It shall be unlawful for an issuer, a payment card network, an acquirer bank, or a processor to alter or manipulate the computation and imposition of interchange fees by increasing the rate or amount of the fees applicable to or imposed upon the portion of a credit or debit card transaction not attributable to taxes or other fees charged to the retailer to circumvent the effect of this section. 6-26.2-4. Penalties. An issuer, a payment card network, an acquirer bank, a processor, or other designated entity that has received the tax amount data and violates § 6-26.2-3 shall have engaged in a deceptive trade practice in violation of the provisions of chapter 13.1 of title 6 and shall be subject to a civil penalty of up to one thousand dollars ($1,000) per electronic payment transaction in violation of § 6-26.2-3, and the issuer shall be responsible to refund the merchant the interchange fee calculated on the tax amount relative to the electronic payment transaction.

SECTION 2. This act shall take effect upon passage.