Is It Legal for Businesses to Refuse to Take Cash?

Credit card transaction.
By Richard Dahl on August 23, 2019 12:00 PM

The message on your greenbacks would seem to be unequivocal: “This note is legal tender for all debts, public and private.” 

Well, not all debts, as it turns out. 

More and more restaurants and stores are going cashless, in effect telling their customers, “Your money is no good here.” These retailers cite several good reasons why they reject bills and coins: Increased employee productivity, improved customer convenience, easier bookkeeping, decreased risk of theft and burglary.

While that might be true, what about that official-sounding language on my $20 bill? Can you legally refuse to accept it and make customers pay with some form of plastic?

According to the Federal Reserve, at the national level, the answer is yes. “There is … no Federal statute mandating that a private business, a person, or an organization must accept currency or coins as payments for goods or services,” the nation’s central bank says on its website. “Private businesses are free to develop their own policies on whether to accept cash unless there is a state law which says otherwise.”

And state laws are, increasingly, saying otherwise – something businesses should be aware of when they considerjumping on the cashless bandwagon.

A Backlash to Cashless Policies

For 41 years, Massachusetts maintained a lonely vigil as the only state that said otherwise, with a law requiring that “retail establishments must accept legal tender when offered as payment by the buyer.”

Recently, however, the proliferation of cashless retail establishments has spawned a broader backlash, and Massachusetts is now finding itself with company. This is due to a growing sentiment that cashless retail establishments, while legal, are also discriminatory.

Poorer people in particular are cash-reliant, the Federal Reserve Bank of San Francisco reported last year. The bank found that 47 percent of transactions conducted by members of households with incomes of less than $25,000 were in cash, while the comparable number for households with incomes of more than $100,000 was 24 percent.

Heather Bartels, writing in the Michigan Business & Entrepreneurial Law Review, points out that cashless policies could potentially be open to legal challenge: “Although there is no federal mandate preventing the United States from becoming a cashless economy, the federal Civil Rights Act mandates that all persons be entitled to equal enjoyment of goods without discrimination on the grounds of race, color, religion, or national origin. So if there is a legal argument to be made against cashless enterprises, it is likely to be brought under this Act.”

New Jersey recently joined Massachusetts in banning cashless stores, Connecticut passed a law that goes into effect Oct. 1, and several other states are considering bans.

Cities Join the Backlash

Meanwhile, cities are also getting into the act. In recent months, Philadelphia and San Francisco became the first two cities in the U.S. to ban cashless stores, while several others are thinking about it. But since the Federal Reserve language about jurisdictional exceptions mentions states, but not municipalities, the firmness of the cities’ legal ground in issuing bans appears to be uncertain.

While American retailers are embracing cashlessness in greater numbers, the anti-cashless backlash is having an effect. Amazon, Inc., announced that its cashier-free Amazon Go stores will now accept cash. And Sweetgreen’s, a national salad chain with a cashless payment policy, also announced that it will now take cash.

The more you look at global trends, however, the more these anti-cashless efforts look like blips. The entire nation of Sweden intends to be the world’s first fully cashless society by 2023, and countries and businesses are being advised to prepare for a cashless future.

If the conflict between the cashless and anti-cashless forces grows, the best answer may be one that lawmakers can provide. States, for instance, could expand the functionality of electronic benefit transfer (EBT) cards (which are commonly used by welfare departments to issue benefits) so that users could add cash to them. And policymakers could make it easier for low-income people to open bank accounts.

A cashless world may be on the horizon. It might be wise to make sensible preparations now.

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