Third Time Lucky For US Payment Choice Act?

June 28, 2023
After two consecutive defeats in 2019 and 2021, a bipartisan group of lawmakers has re-introduced the Payment Choice Act, in a bid to mandate cash payment acceptance throughout the US.

After two consecutive defeats in 2019 and 2021, a bipartisan group of lawmakers has re-introduced the Payment Choice Act, in a bid to mandate cash payment acceptance throughout the US.

If passed, the Payment Choice Act will prohibit merchants from refusing cash for in-person transactions of $2,000 or less.

It will also prohibit merchants from charging higher prices for the same goods or services if the consumer wishes to pay in cash.

In the House of Representatives, the bill was re-introduced by Congressman Donald Payne (D-NJ), who also introduced the bill on both prior occasions.

This time he was joined by three original and three additional co-sponsors, split evenly between Democrats and Republicans.

In the upper chamber, Senator Bob Menendez (D-NJ) introduced the bill with support from Senator Kevin Cramer (R-ND) as an original co-sponsor.

Senator Cramer said he co-sponsored the bill to ensure that consumers have the freedom to choose how they pay without pressure from merchants.

“Cold hard cash is still legal tender in the United States, despite some businesses’ exclusive acceptance of electronic payments,” he said.

“Americans should have the option of using plastic, but they should be the ones who make that choice, not businesses.”

Bruce Renard, executive director of the National ATM Council, said his organisation has endorsed the bill and has welcomed its bipartisan support.

“The option for consumers to pay with cash for basic goods and services is an important economic right we must preserve for all Americans, including our most vulnerable citizens,” he said.

“Accepting cash as a payment option is not too much to ask of all the retail establishments blessed with the opportunity to do business in the greatest marketplace on earth.”

Several states, including New Jersey and Massachusetts, already have a Payment Choice Act, but the US has never passed a Payment Choice Act at the federal level.

On the bill’s two previous attempts, it gained support in the House of Representatives but failed in the Senate.

Financial exclusion concerns

Payne said his primary motive for re-introducing the bill is to ensure that vulnerable Americans with fewer payment options do not face financial exclusion.

“Every American should have the right to pay in cash,” he said. “There are too many stores and businesses that want to reject it in favour of digital payments.

“But cash is the only option available for millions of Americans to pay for food, housing and other essentials.”

In 2022, a study by the Federal Deposit Insurance Corporation (FDIC) found that 4.5 percent of US households are “unbanked”, meaning that no one in the household has access to a savings or checking account.

Source: FDIC

This percentage was the lowest since the FDIC’s national survey of the unbanked began in 2009, but still amounts to about 5.9m households.

The most common reason for not having a bank account was “not having enough money to meet minimum balance requirements”, which was cited by about one in five unbanked households.

This was followed by lack of trust in banks and privacy concerns, each of which were cited by about one in ten unbanked households.

However, it is not the case that these unbanked households have no way to pay for goods and services other than cash, as Payne implies.

As noted by the FDIC, about a third of unbanked households were using prepaid cards at the time of the survey, and about one in five were using non-bank online payment services such as PayPal, Venmo or Cash App.

Nonetheless, all those who sponsored the bill acknowledged the “decline” of cash as a payment method, particularly since the COVID-19 pandemic.

In 2022, a study by the Federal Reserve Bank of San Francisco found that cash accounted for 18 percent of all payments in the US, having fallen from 31 percent in 2016.

Source: Federal Reserve Bank of San Francisco

For in-person transactions, cash accounted for almost half of payments in 2021, down from 61 percent in 2019.

Privacy a key concern

In addition to financial exclusion concerns, several sponsors of the bill said they are worried about the privacy implications of the trend towards cashless payments.

“I am concerned about the safety and privacy of the data that companies are collecting from consumers during routine purchases,” said Payne.

“Besides, American cash is a lesson in American history. A few years ago, we fought over who should be represented on our currency. Now, companies want to eliminate currency completely.”

The Consumer Choice in Payment Coalition (CCPC), a group that includes businesses, non-profits and consumer advocates, also shares this concern.

“We believe it is critical to ensure that cash remains a universally available payment option for consumers throughout the nation,” said Ruth Susswein, director at Consumer Action, a CCPC member.

“Non-cash transactions generate vast amounts of data, recording the time, date, location, amount and subject of each consumer’s purchase.

“These are available to digital marketers and advertisers who are engaged in developing and refining increasingly sophisticated techniques to identify and target potential customers.”

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