A bill that would prohibit credit card companies from charging businesses a fee for tip transactions advances in the General Assembly.
These fees are typically 2-3 percent of the tip amount.
During public comment for the bill in House Economic Development, Banking, Insurance & Commerce committee meeting, the bill got pushback from several financial sector representatives.
Opposition from financial services sector
David Mench with the Delaware Bankers Association, warned
that financial services contribute more than $100 million annually to the state's franchise taxes, and banning a surcharge on tips will be overall detrimental to the state's economy.
And Michael Edwards, counsel for the Cooperative Credit Union Association, said implementing the bill would, "increased fraud, impose significant costs on credit unions and result in worse rates and reduced services to Delaware credit union members."
Delaware Businesses support HB 315
But several restaurant and service sector associations said their members are struggling with higher costs, and supported banning the fees.
According to Brennan Duckett, director of technology and innovation policy at the National Restaurant Association, credit card fees are among the highest costs for restaurant operators.
"This bill would end the unfair practice of operators effectively paying a private toll to credit card companies simply for collecting and distributing employee compensation," he said.
And Kristin Stonesifer, owner of The House of Coffi in Dover, said the interchange fee on tips costs her about $6 a day. She pays employees out for tips daily. But there's a four-day delay on pay out to her for purchases made by card.
"It doesn't seem like that much money," she said. "But then you multiply it by 100 days, 365 days, and it does hit our bottom line."
Bill sponsor: "This is the right thing to do."
State Rep. Madinah Wilson-Anton, a member of the House Economic Development, Banking, Insurance & Commerce committee, agreed with the bill’s principle of helping small businesses' tight profit margins. But she worried lawmakers don't have enough information on how much it costs for credit card companies to provide services.
"I mean, this is the Economic Development Committee. It's not labor," Wilson-Anton said. "...I am not normally reading talking points from a bank and seeing things that I agree with, but we have thousands of jobs that are based in this industry in the state, and so I think there should be a little bit more of a delicate approach here."
The bill's sponsor, State Rep. Kim Williams, said the bill's focus is relatively narrow, and protects Delaware's middle and working class.
"Every business, whether you're small or large, contributes to the state, through all types of fees," she said. "But why should a business pay an interchange fee on something that is not counted as revenue for their business? We're not asking to remove the interchange fees on everything. We're just saying don't tax the tips."
Illinois passed a law in 2024 banning surcharges on credit card swipe fees for tips– the first state to do so. A federal judge upheld that law, after a challenge from the Illinois Bankers Association and Illinois Credit Union League.
Williams said she wanted to see how that case played out before introducing similar legislation in Delaware. The case in Illinois is under appeal, but Williams thinks the ruling will stand.
"This is the right thing to do," she said. "We're on the right side here."
The committee voted to move the bill forward. It's up for consideration on the House floor.