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Assistant attorney general warns Senate committee of legal risks if state restricts credit-card fees or requires cash acceptance
Summary
The Senate Committee on Finance heard from Assistant Attorney General Meredith Chaudois that Vermont could face federal preemption and dormant commerce clause challenges if it enacts S.135, a proposal restricting interchange fees and requiring acceptance of cash. She urged caution while litigation in Illinois proceeds.
The Vermont Senate Committee on Finance on April 17 heard legal warnings about S.135, a bill that would restrict interchange (credit-card) fees and would bar merchants from refusing cash. Meredith Chaudois, an assistant attorney general in the Consumer Protection Unit, told the committee litigation in Illinois suggests federal preemption risks and other constitutional challenges could follow if Vermont enacts similar rules.
Chaudois summarized recent procedural rulings in Illinois litigation over a comparable state law. She told the committee that a federal judge in the Northern District of Illinois issued preliminary injunctions affecting national banks and federal savings associations, citing preemption under the National Banking Act and the Home Owners' Loan Act. The judge denied preliminary relief as to some non‑national banks and the card networks; later rulings adjusted those determinations as to federal credit unions and out‑of‑state banks, Chaudois said.
"It's important that we keep in mind that this is not the final word on this case," Chaudois told the committee. "Any preliminary injunction issued by the United States District Court in the Northern District of Illinois is not a final ruling on the merits, nor is the court's opinion binding on our Vermont state court or federal courts in the Second Circuit." She added, "I don't have a crystal globe or crystal ball, but it is a possibility given what happened in the Illinois case."
Chaudois also flagged a separate constitutional concern frequently briefed in similar suits: the dormant Commerce Clause, which can block state measures that discriminate against or unduly burden out‑of‑state economic interests. She said that if a law carved federal institutions out of its scope, the remaining in‑state regulatory effect could invite Commerce Clause challenges.
Committee members expressed support for small businesses and restaurants but several said they were reluctant to move forward while the Illinois litigation remains unresolved. One senator noted the committee would rather see the Illinois case advance further before Vermont takes action; another suggested waiting about a year to watch how the case develops.
No formal committee vote or directive on S.135 was recorded during the session. Chaudois said the attorney general's office could be called on to defend any state action but could not predict whether Vermont would be sued.
The committee indicated it will continue to monitor the Illinois litigation and the positions of other states considering similar statutes before deciding whether to advance S.135.
