In Missouri, community banks and credit unions still do what finance was originally meant to do: they know their customers.
They know the difference between a bad season and a bad borrower. They understand that small manufacturers in Springfield, farmers in Saline County, and family businesses along Main Street don’t operate on the same timelines as Wall Street. When cash flow tightens or a line of credit needs flexibility, it’s usually a local lender — not a national megabank — that finds a way to make things work.
That relationship-based lending has long been a quiet backbone of Missouri’s economy. It’s also what’s now at risk because of a pending federal court decision in the Eighth Circuit that could upend how debit card payments are priced — and, in the process, make credit scarcer and more expensive for Missourians.
At the center of the case is a regulation most people have never heard of: Regulation II, which governs debit card interchange fees. These are the pennies on the dollar fees paid by merchants when customers swipe a debit cards — fees that help banks and credit unions cover the cost of running secure, real-time payment systems.
All Reg II does is ensure that the capped fees reflected the real, unavoidable costs of processing a debit transaction — things like authorization, fraud prevention, network routing, and settlement.
The reason the regulation is needed was because of corporate lobbying.
National retailers with enormous lobbying operations pushed Congress to cap debit card fees. They framed the issue as consumer protection. If merchants paid less, they promised, shoppers would see lower prices. Unfortunately, they didn’t help shoppers like they said they would.
Not only did consumers not get cheaper prices at the checkout counter. They also got higher banking costs.
Because debit card fees no longer covered the full cost of processing transactions, banks and credit unions had to make up the difference elsewhere.Free checking accounts disappeared. Minimum balance requirements went up. Debit rewards were cut. Monthly fees became more common.
But even that wasn’t enough for the largest retailers. Now, they are trying to strike down Reg II so the debit card cap can shrink even more.
After losing a similar challenge in federal court more than a decade ago, they have kept searching for a different outcome. Last year, a district court in North Dakota gave them one, gave ruling against Reg II.
If that decision stands, it will help big retailers while further squeezing consumers, community banks and credit unions. That means fewer loans, higher borrowing costs, and less flexibility when businesses hit rough patches.
Missourians shouldn’t have to pay higher fees or lose access to credit so America’s most profitable retailers can shave a few more basis points off their expenses.
Local lenders keep Missouri’s economy running in good years and bad. The courts should not make their job harder to solve a problem that doesn’t exist.
The Eighth Circuit should reverse the district court’s ruling and uphold Regulation II – not for banks, but for the communities that depend on them.
Christopher Arps is a local radio host in St. Louis
