Federal Reserve Open Board Meeting, June 29, 2011

Recording of the live webcast of the Federal Reserve's June 29, 2011 open Board meeting on the proposal governing debit card interchange fees, the fraud prevention adjustment, and routing and exclusivity restrictions.

Board meeting material and high-definition video: http://www.federalreserve.gov/aboutthefed/boardmeetings/20110629openmemo.htm

Transcript: http://www.federalreserve.gov/mediacenter/files/OpenBoardMeeting20110629.pdf

From the Federal Reserve: http://www.federalreserve.gov

Federal Reserve's meeting on the proposal governing debit card interchange fees, the fraud prevention adjustment, and routing and exclusivity restrictions.
CHAIRMAN BERNANKE: Good afternoon, everybody. We're meeting today to review the final rule implementing the Debit Card Interchange provision to the Dodd-Frank Act. We're approaching the one-year anniversary of Dodd-Frank. The Federal Reserve has been given substantial and important new responsibilities under this act, and we have been working diligently to implement the statutory requirements under our purview.
The interchange rule we are considering this afternoon has been one of our most challenging rulemakings under Dodd-Frank to date. We received well over 11,000 comments on our proposed rule. We have taken the time needed to review these comments carefully. They've been very helpful to us, and the final rule reflects a number of changes suggested by the commenters. I believe the final rule that we will discuss today gives careful and appropriate consideration to the statutory language, the cost data available to us, and the complexities of the debit interchange payment system.
The Board plans to monitor developments in the debit card market on an ongoing basis. That monitoring will include collecting and publishing data related to debit card costs and interchange fees. These data will help the Board, as well as issuers both large and small, merchants, networks, consumers, and Congress assess whether the statute and the rule are effectively accomplishing their intended goals. I know that staff has spent significant time and effort on this rulemaking, and I want to commend them for their hard work and dedication.
Let me now turn to Vice Chair Janet Yellen, who chairs the Board's committee on Payments, Clearing, and Settlement, the committee which has reviewed the staff's proposal. Janet.
VICE CHAIR YELLEN: Thank you, Mr. Chairman. Debit cards are a critical component of the nation's retail payment system. They're an efficient form of payment and provide many benefits to both cardholders and merchants. Over the past decade, consumers have substantially changed their methods of payment and are increasingly using debit cards where they once relied on checks or credit cards. Debit cards are accepted at about 8 million merchant locations in the U.S., and have become by a wide margin the most prevalent form of noncash payments in this country. Board staff projects that U.S. debit card volume may exceed 50 billion transactions this year, and recent annual growth continues to be at double-digit rates.
The debit card success story has been marred by the level of discord between merchants and issuers on the interchange fee issue, which has played out in the courts, in the Congress, and more recently here at the Board. The continued vitality of the debit card system requires balancing of the legitimate needs of depository institutions that issue debit cards; merchants that
accept them; networks that process them; and, very importantly, the consumers or the customers of both the banks and the merchants.

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• debit cards
• interchange fee
• Ben Bernanke
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• Yellen
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