Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.
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What the Payment Choice Act Means for Cash
Since the first paper bills emerged in the United States in 1690, cash has been a payment choice for governments, merchants, and consumers in our nation.
The pandemic, though, changed things for cash users. Notices appeared at merchant locations like coffee shops, restaurants, and other retail sites throughout the country: "Credit or Debit Card Only" or "We are going cashless!" Merchants may choose not to accept cash for a variety of reasons, including hygiene concerns, banking office closures or reduced hours that often made it harder to get cash for the till, and coin supply issues that made it hard to make change even when cash was accepted. Surprisingly, even as the pandemic's influence is lifting, some merchants still refuse to accept cash.
However, that may change with the Payment Choice Act of 2021 (H.R.4395), introduced on July 9, 2021, and sponsored by Rep. Donald M. Payne Jr. (D-New Jersey). The proposed legislation is designed "to prohibit retail businesses from refusing cash payments, and for other purposes." The bill passed in the house twice: first on June 21, 2022, as an amendment to the Financial Services Racial Equity, Inclusion and Economic Justice Act, and on July 14, 2022, as an amendment to the National Defense Authorization Act. The bill would need to be passed by the Senate to be enacted and we will keep an eye on its progress. A similar bill, Cash Always Should Be Honored, was introduced in 2019 by Rep. David Cicilline (D-Rhode Island), who was concerned that cashless businesses discriminate against customers who do not have access to a credit card. The bill did not move forward but the PCA captures the original intention.
Key points in the Payment Choice Act include:
- Requires retail businesses—those that sell or offer goods or services at retail to the public and accept in-person payments at a physical location—to accept cash as a form of payment for sales in amounts less than $2,000
- Prohibits them from charging cash-paying customers a higher price compared to customers not paying with cash
- Provides for enforcement through preventative relief and civil penalties
Our work in payments inclusion informs us that cash is a primary payment choice for about 7.1 million US households (5.4 percent) that choose not to use banks. These rates are highest among low-income, Black, Hispanic, Native Americans, and people with disabilities. When cash is not accepted, it can create a barrier that excludes primary cash users from the payments system and from getting needed goods and services. This can create hardship for people and may also result in loss of business for merchants.
But isn't cash acceptance a requirement? The answer is no. While cash is US legal tender, merchants don't have to accept it. According to the Board of Governors of the Federal Reserve System, "there is no federal statute mandating that a private business, a person, or an organization must accept currency or coins as payment for goods or services."
Some states and cities (New Jersey, Colorado, Washington, DC, New York City, Philadelphia, and San Francisco) have enacted similar merchant cash acceptance policies. Other states, like Georgia, have bills pending. These legislative actions create a mandate for businesses that may override their choice to not accept cash as a payment option while protecting consumers' preferences to use cash. What do you think?
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