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No Law Requires Acceptance of US Currency
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Take any bill out of your wallet, notice the little “Federal Reserve Note” written in the ribbon at the top of the bill? You may have heard that it’s considered legal tender and that you are required to accept it as payment.
As it turns out, while the Coinage Act of 1965 states that “United States coins and currency (including Federal reserve notes and circulating notes of Federal reserve banks and national banks) are legal tender for all debts, public charges, taxes, and dues,” there is no such law that requires anyone to accept them. Section 31 U.S.C. 5103 of the act only states that the coins and currency are considered legal tender, but a business has the option must accept it as payment.
So the next time you want to “get back” at a business by paying in pennies, they are legally allowed to tell you to pound sand.
(Photo: r-z)
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True story, but I’m more surprised at the number of businesses who will nonetheless tolerate such penny protests. In general, businesses can refuse to do businesses with you for any nondiscriminatory reason–even for discriminatory reasons in some cases!
The legal history behind Fed Reserve Notes has more to do with establishing a stable currency (in a time where there were hundreds of currencies with varying rates of exchange) than forcing companies to accept any particular consideration as part of exchange.
Most of the businesses getting “attacked” by pennies are utility, credit card, and other revolving credit or “credit” companies. Accepting and processing a boatload of pennies is still cheaper than pursuing someone with a lawsuit for not paying at all.
But they are not required to accept the payment. And I can’t say how many times someone tried to slip a roll of quarters laced with nickels or slugs. Is it worth the late charges?
I would think that if someone at least attempted the payment and the lender didn’t accept and said you still didn’t pay, you’d be better off in a court situation. It’d depend on the situation probably though.
Let them pay however they are willing to pay, to stay out of courts and collections.
I had been collecting pennies, nickels and dimes in a large cooler water jug for a year. I just would dump my spare change in it each night. I decided to go down to Walmart and use this machine that counts your change. It was really cool as I dumped this huge jug of change in and it just kept counting. The only catch is you have to pay them a fee for doing this. I did not really care because for me to count and roll all these would have been a pain in the rear. It worked out great and it printed me a voucher for $277 by the time it was done cranking through all this change. So if you are someone wanting to take all your pennies and change down to pay for a large item, just go by Walmart and use there automatic change processor.
I have to ask why not take the coins to your local bank and deposit in the checking account? They should offer the same service to count the change for free with a counting machine and not charge a fee.
Not all banks offer that service for free, some do not offer it at all.
Many of those same machines (Coinstar being a popular one) will waive the fee if you put the money from your counted change into a certificate, like to amazon.com or starbucks. Since amazon sells everything and then some, I usually turn my change in for a gc to amazon, and then Christmas gifts are all taken care of
I work for a city government (Clerk of Court). We actually have an ordinance on the books that limits the amount of change we are allowed to accept. 26 coins in any denomination. I get a lot of bartenders/servers who pay me in single bills, which can also be a pain in the rear.
Shocking
)) I did already know this though.
OK, it has been many years since my business law classes … but why would the § 3-603 of the Uniform Commercial Code not apply?
§ 3-603(b) states:
“If tender of payment of an obligation to pay an instrument is made to a person entitled to enforce the instrument and the tender is refused, there is discharge, to the extent of the amount of the tender, of the obligation of an indorser or accommodation party having a right of recourse with respect to the obligation to which the tender relates.”
This would seem to say that the amount of the tender is discharged if there is a tender and refusal. Although this may only apply to situations where there is an instrument in place.
In fact, the Treasury page you link to says “… for payment for goods and/or services.” It’s possible that creditors are bound to take your pennies (since they are payment toward a debt, and not payment for good and services, in spite of the fact that the debt resulted from purchase of good and services) while Wal-Mart, Applebees, etc are not bound to take them as mere payments. It’s always been my understanding the lenders must accept payments, but vendors need not.
There are any number of reasons why UCC 3-603 isn’t generally on point here, but a quick answer: the section speaks of the obligation to pay an “instrument,” which in Article 3 speak narrowly means “negotiable instruments.” UCC 3-104(b). The most common negotiable instrument for consumers: a check!
Also, keep in mind that “tender” can have multiple meanings–here, I believe it is not being used as a noun (i.e. tender as $$) but as a verb (e.g. to tender payment = to deliver payment as ordered by an instrument).
The analogy on point would be: if someone indorsed a check over to you, which you took to a bank to cash, but the bank tries to pay you entirely in pennies, and you tell them to shove it! Then, the legal obligation of the person who “indorsed” (signed the check over to you) the check would be discharged.
Commercial law can be tricky!!
Tender is being used as both a noun and verb in § 3-603(b).
Looking at the definition of 3-104(b) … Per the definition, many other things fit the description of a negotiable instrument. A mortgage, for example.
I’m not seeing how your information says that § 3-603(b) isn’t on point. You’re correct that the check writer (and bank) would have no further obligation if you refused the pennies, but the same would be the cash when any debtor tenders payment to satisfy obligation of an instrument.
Mm. For some reason I was thinking that loans are negotiable instruments. That’s why 3-104(b) doesn’t apply – unless we’re taking about commercial paper.
Wow, it has been a loooong time since those classes.
Yea, I agree my comment wasn’t the most clear answer. 3-603(b) is occasionally incorrectly cited for the proposition that creditors can’t refuse payment, and if they do this excuses the obligor.
This is wrong. Normal contract law rules apply. Here, you’d read 3-603(a) NOT 3-603(b). Under standard contract law, creditors don’t necessarily have to accept any form of tender–an extension of the theme that you can’t make unduly burdensome payments with pennies, etc.
3-603(b) applies in the sort of narrow circumstances I described in my prior comment–to discharge the obligation of an *indorser* or accommodation party. If you are paying off your car loan, home loan, etc (or paying for breakfast at Denny’s etc), 3-603(b) is not where you should look.
Got a case cite for “Under standard contract law, creditors don’t necessarily have to accept any form of tender–an extension of the theme that you can’t make unduly burdensome payments with pennies, etc.”
@Bender: there could be any number of cases (or none) depending on your specific facts, state, etc. Ultimately, though, its unnecessary to reach the conclusion.
Generally, if you have no legal duty to do something, then not doing it is not unlawful (double negative, I know!). In other words, you don’t need a case or statute to specify that your actions are lawful… Its sufficient to ensure that no law says your actions are unlawful. That seems to be the point of the post: no law (case, statute, or otherwise) generally requires creditors to take any particular form of payment.
My post within this thread is in that same vein: the UCC section cited doesn’t require creditors to accept any particular form of payment, standard contract law applies. Likewise, standard contract law doesn’t require any particular form of payment in most cases.
I have staged a penny protest, but have taken advantage of the fact that the self check out machines at the grocery store, Home Depot, Walmart, etc. accept change as payment. I grab a fist full of change everytime I head out to one of these stores. I then pay the balance by credit card. Beats counting loose change and rolling them to bring them to the bank. Plus it’s like getting a small discount on those purchases because a smaller amount shows up on the credit card statement.
I do get a chuckle, when I have to return the item, and I get back some odd amount, say $1.64, in cash and then a credit to my charge card for the difference.
I would think after a while it hurts you more than them since it takes a lot of time to put in the coins and they probably don’t care if their lines are that long or dealing with the coins since a machine ends up dealing with them.
I remember an article once about a man who paid a speeding ticket in another town by sending in a box of unrolled pennies for the amount of the fine. I do not recall what the end result was.
I remember going into grocery stores as a kid in our small town and having a pocket full of pennies and the clerk cringing when I pulled them out. Other than that I have never experienced any issues and never really really thought about it. I would think any store would be happy just to make the sale.
This is a really interesting law. As to the discussion about paying in pennies, that seems irritating for all parties. I would rather just shop elsewhere.
There was an interesting YouTube video a while back showing a guy paying an impound lot (where his car had been towed) in pennies. For some reason or other he thought the towing company was slimy and staged a penny protest.
In a situation like that where your car is towed and being held by a company until you pay the debt. I’m not so sure pennies could be refused. The owner of the car certainly didn’t sign any contract with the tower. I’m not sure how the impound lot could justify keeping the owners car by not accepting payment.
Certainly I’d agree that any retail purchase doesn’t need to accept pennies.
You learn something new every day! I don’t do penny protests but I have an awful habit of forgetting to grab my change…I just hate carrying around coins.