Board of Governors of the Federal Reserve System

June 29, 2011

Debit cards are a critical component of the nation's retail payment system. They are an efficient form of payment, and provide many benefits to both cardholders and merchants. Over the past decade, consumers have substantially changed their method of payment, and increasingly are using debit cards, where they once relied on checks or credit cards. Debit cards are accepted at about 8 million merchant locations in the United States 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 who are the customers of both the banks and the merchants. I hope that the banking industry, the retail industry, and the card networks will work together in a collaborative manner to ensure that the debit card system, and card systems more broadly, are designed in a manner that best balances the needs of all parties.

I want to thank the staff who worked so tirelessly on this rulemaking. I believe their recommendations reflect a careful consideration of the comments received and an appropriate implementation of the statutory requirements. I will now turn to Mark Manuszak, who will walk us through the draft final rule.