Lately there has been confusion regarding whether businesses have the ability to refuse cash payments, instead relying solely on credit card transactions or electronic funds transfers such as mobile payment apps. This switch to “cashless” has left many people confused on just what these businesses are allowed to do.
Federal law states that U.S. coins and currency are legal tender and that foreign gold or silver coins are not. But the law does not mandate that private businesses must accept cash. The Federal Reserve has said private businesses can develop their own policies — unless state law says otherwise.
Without federal policy on the issue, states are left to make their own decisions. Only Massachusetts, New Jersey, Rhode Island and Connecticut have passed legislation forcing businesses to accept cash. Additionally, San Francisco, Philadelphia and New York have also prohibited cashless policies by businesses.
The movement to ban cashless business is not new. The Massachusetts state law, which provides that “no retail establishment offering goods or services for sale shall discriminate against a cash buyer by the use of credit,” was passed in 1978.
Two bills introduced in the U.S. House in 2019 intended to ban cashless-only brick-and-mortar retail establishments. Rep. David Cicilline, D-R.I., used FDIC data to illustrate how 8.4 million American households do not have a bank account and 32 million households, largely of working class Americans, do not use a credit card. Neither bill has progressed.
So if private businesses do not have to accept cash payments for goods and services unless a state law mandates it, what happens if a consumer has already “incurred the debt,” such as eating a meal at a restaurant or filling up a gas tank?
Professor Clayton Gillette of New York University School of Law says that if a business alerts a consumer they do not accept cash, and the consumer proceeds to consume or possess goods or services, then that consumer has agreed to the terms the business has offered them. It can be viewed as a contract.
Ordinances in the Carolinas are sparse, but examples include the following:
- Myrtle Beach: Art. IX, Sec. 14-152, requires business establishments that sell gas to require full payment in advance before activating the pumps, with payment options including purchase by any legal means: cash, credit card, debit card, checks or otherwise.
- Charleston: Art. XIII, Sec. 19-401, requires every vehicle storage facility doing business within the corporate limits of the city to accept major credit cards in addition to cash. There shall be no additional fee charged for the use of credit cards.
- Raleigh: Chapter 7, Sec. 12-7015(b) and Durham, N.C.: Art. IV, Sec. 50-391 require fees for nonconsensual towing of a motor vehicle be payable by cash, debit card or major national credit card at no extra cost.
Neither North nor South Carolina has legislation regarding cashless payment policies. But North Carolina Attorney General Josh Stein has said that businesses do not have to put up signs alerting customers of cashless policies but that it is “the right thing to do.”
Also important to investigate when evaluating a cashless policy is the fact that many states have “no-surcharge” laws which prohibit business owners from passing along the credit card company’s transaction charge, to the consumer.
Without specific legislative guidance, developing and publicizing payment policies should be carefully considered.
Yolanda N. Davis is an associate in the corporate and tax practice group at Nexsen Pruet and Carrie Palmer is a member and leads NP general counsel360. Reach Davis at YDavis@nexsenpruet.com and Palmer at CPalmer@NexsenPruet.com.