On June 3, Colorado Governor Jared Polis vetoed a bill that would have prohibited payment card networks from charging interchange fees on the portion of an electronic payment transaction attributable to state or local taxes. The bill also would have exempted cards issued by institutions holding less than $60 billion in consolidated worldwide assets, required compliance through various settlement-adjustment mechanisms, and would have imposed civil penalties on networks that violated its provisions. The legislation would have taken effect January 1, 2028. In his veto statement, Polis cited substantial legal risks, noting that the OCC and the NCUA have taken steps to assert that federal law preempts state-level interchange fee legislation, that the Illinois General Assembly delayed implementation of its similar law for the second time, and that a U.S. district court recently granted a permanent injunction preventing Illinois from enforcing its interchange fee limitation against national banks, federally chartered savings associations, and payment card networks (covered by InfoBytes here).

Polis also questioned the bill’s operational feasibility, stating that it would create a “Colorado-specific carve-out to the national and global integrated payments system,” could require consumers to swipe twice for the same transaction, force small businesses to update their payment systems, and potentially affect rewards cards and the availability of credit products. He further noted that small community banks and credit unions informed his office that, despite the bill’s intended exemption, they would not be exempt in practice given the “integrated nature” of the global payments system. Polis also objected to an amendment requiring retail businesses with more than 500 statewide employees to apply savings in specific ways, calling the provision impossible to enforce, a dangerous precedent in state statute, and inappropriate government direction of how private entities use their revenues.