What is the coin shortage and why is it happening?
June 2020 marked the onset of yet another COVID-19-induced shortage: a deficit of pennies, nickels, dimes, and quarters in the cash registers of American businesses was imminent.1 On June 11, the Federal Reserve announced a temporary cap on distribution of coins to banks.2 By July, retailers such as Walmart, Kroger, and CVS were unable to provide change in coins to all their customers.3
The coin shortage resulted from disruptions to the normal circulation of coins through the economy due to the COVID-19 pandemic.4 According to the Federal Reserve, there are enough coins in circulation to meet demand. However, a slowdown in consumer spending, concerns over virus exposure from handling contaminated coins, and an increase in cash locked in the registers of shuttered businesses have bottlenecked channels that usually keep coins moving through the economy.5 This reduced circulation has depleted inventories in certain areas, leaving businesses, banks, and consumers without the coins they need. Reduced coin deposits by banks to the Federal Reserve and decreased production at the U.S. Mint due to COVID-19 employee protection measures have made responding to the shortage more challenging.6
How does it impact consumers?
Consumers across the country have been caught off guard by the shortage. A Phoenix consumer was left wondering where her money had gone after a gas station required her to round up her bill when she did not have exact change.7 In Illinois, a resident had to delay her laundry when her son was unable to find quarters after asking multiple banks and businesses.8
While use of credit cards and mobile payment applications is growing,9 cash is still an important part of the economy. In 2019, it was the second-most popular payment method, accounting for 26 percent of transactions (debit cards came in first at 28 percent).10 Currency shortages can especially impact low-income Americans who may not have access to bank accounts, credit cards, or the ability to make electronic transactions.11 Young adults and the elderly also use cash at a higher rate than their middle-aged peers; both of these groups conducted a third or more of their 2019 transactions in cash.12 Small businesses that rely on cash, such as vending machine operators, amusement parks, and laundromats, are also particularly vulnerable to disruptions in coin circulation.13
What is being done to resolve the problem?
The Federal Reserve is continuing to allocate coins to depository institutions based on historical order sizes to ensure that distribution of existing coin inventory is fair and equitable.14 The U.S. Mint has also begun to increase production now that measures to safeguard employees from exposure to the virus have been implemented.15 Additionally, the Federal Reserve has created a U.S. Coin Task Force composed of representatives from relevant government agencies and industry groups. The Task Force released its first statement on July 24th, urging the public to put their coins back into circulation by using them for purchases or exchanging them for bills.16 Local banks have taken steps to mitigate the shortage as well. For example, a Wisconsin bank recently launched a coin buyback program offering anyone who turns in coins a $5 bonus for every $100 of coins.17
Retailers short on coins have implemented the following measures to address the shortage:
- Prohibiting or limiting cash transactions
Since refusing cash payments is legal at the federal level and in most states,18 some retailers have stopped accepting cash altogether.19 Others have restricted cash payments by designating self-checkout machines as card-only or limiting use of change machines to customers.20
- Asking consumers to donate change to charity or load it onto a loyalty card
A number of retailers request that customers donate their change to charity, with some offering an additional option of transferring change to a loyalty card for future purchases.21
- Providing customer incentives to exchange coins for bills
The Growler Guys, a craft beer store in Oregon, has offered to pay consumers five cents for every dollar of coins they exchange,22 some convenience stores have offered customers a free soda or sandwich if they swap out their coins for bills,23 and a Taco Bell in California has offered a free taco to customers who pay with coin rolls.24
As businesses respond to the coin shortage, there are two primary ways they may run afoul of state deceptive trade practices acts: 1) failing to provide adequate notice of new payment policies and 2) charging more than the advertised or shelf price. Though retailers generally have broad latitude in deciding which payment methods to accept e.g., cash, check, or credit card concealment or misrepresentation of these policies may violate state consumer protection statutes. Many retailers have been warning consumers of the coin shortage and new payment policies through signage, social media campaigns, and press releases.25 However, there are also reports of businesses failing to provide notice to consumers.26 Although some jurisdictions may not require businesses to post payment policies, providing notice to customers reduces consumer confusion and can help businesses avoid allegations of deceptive conduct.27
Charging more than the advertised or shelf price also likely violates state deceptive trade practices acts,28 and failure to provide all change due amounts to charging customers marginally more for the products they purchased. Therefore, retailers that require consumers to round up prices, donate change to charity, or otherwise forgo the change they are owed may be in violation of such statutes.29
What should consumers do?
Though authorities are confident that the coin shortage will resolve once the economy is reopened,30 consumers can take steps to mitigate the effects of the coin shortage:
- Bring a debit/credit card or exact change when shopping
As more retailers require cashless transactions or limit the ways customers can receive their change, consumers can ensure a smooth shopping experience by bringing a debit/credit card or exact change. Public health authorities also recommend avoiding cash to reduce virus exposure.31
- Be alert for signage about payment policies
Consumers should be aware of the coin shortage, look for guidance from businesses regarding payment policies, and when in doubt, ask a store employee if they need exact change before reaching the checkout aisle.
- Report deceptive practices to your attorney general
Consumers can easily find out how to file a consumer complaint with their state or territory attorney general by visiting ConsumerResources.org, NAAG’s consumer-facing website, which also offers educational materials on a variety of consumer topics to help consumers to stay informed on important issues.
- Exchange coins for bills at local banks and retailers
If consumers have excess coins on hand, they can help those in their community who depend on cash by exchanging their coins for bills at banks and some retailers. Since turning in pennies might even score consumers a free Slurpee,32 there has never been a better time for coin hoarders to clean out their piggy banks!
- Jeanna Smialek & Alan Rappeport, A Penny for Your Thoughts Could Be a Lot Harder to Find, N.Y. TIMES (June 25, 2020), https://www.nytimes.com/2020/06/25/business/economy/coin-shortage-coronavirus.html?searchResultPosition=1.
- Press Release, Fed. Reserve, Strategic Allocation of Coin Inventories (June 11, 2020), https://frbservices.org/news/communications/061120-strategic-allocation-of-coin-inventories.html.
- Megan Cerullo, Kroger will no longer give change in coins amid shortage, CBS NEWS (July 14, 2020), https://www.cbsnews.com/news/kroger-coin-shortage-no-change/; Clare Duffy, Why it’s getting harder to get exact change, CNN BUS. (July 14, 2020), https://www.cnn.com/2020/07/14/business/grocery-store-coin-shortage/index.html; Danielle Abril, Why is there a coin shortage in the U.S.?, FORTUNE (July 18, 2020) https://fortune.com/2020/07/18/why-is-there-a-coin-shortage-in-us-nationwide-how-did-it-happen-when-will-it-end-what-to-know-kroger-walmart-cvs/.
- Why do U.S. coins seem to be in short supply?, FED. RESERVE, https://www.federalreserve.gov/faqs/why-do-us-coins-seem-to-be-in-short-supply-coin-shortage.htm (last visited July 22, 2020).
- Jason Knowles & Ann Pistone, US Coin Task Force to tackle shortage as it leaves some short-changed amid coronavirus pandemic, ABC 7 (July 26, 2020), https://abc7chicago.com/coin-shortage-us-task-force-why-apple-pay/6335687/.
- Fed. Reserve, supra note 2.
- Susan Campbell, Can Arizona businesses keep your change during the national coin shortage?, KPHO BROADCASTING CORP. (July 22, 2020), https://www.azfamily.com/news/investigations/3_on_your_side/originals/can-arizona-businesses-keep-your-change-during-the-national-coin-shortage/article_895c28c4-cc33-11ea-b6a8-27b58c623e44.html.
- Knowles & Pistone, supra note 5.
- RAYNIL KUMAR & SHAUN O’BRIEN, FED. RESERVE BANK OF S.F., 2019 FINDINGS FROM THE DIARY OF CONSUMER PAYMENT CHOICE (June 2019), https://www.frbsf.org/cash/publications/fed-notes/2019/june/2019-findings-from-the-diary-of-consumer-payment-choice/.
- Michael S. Derby, U.S. Experiencing Coin Shortage Due to Coronavirus Pandemic, Powell Says, WALL ST. J. (June 17, 2020), https://www.wsj.com/articles/u-s-experiencing-coin-shortage-due-to-coronavirus-pandemic-powell-says-11592429051?mod=searchresults&page=1&pos=2.
- KUMAR & O’BRIEN, supra note 10.
- Kathleen Wilson, COVID disrupted Mint operations: Now a coin shortage is hitting parts of California, DESERT SUN (July 5, 2020), https://www.desertsun.com/story/news/2020/07/05/coin-shortage-hitting-area-rationing-starts-coronavirus-ventura-county/5380315002/; Smialek & Rappeport, supra note 1.
- Fed. Reserve, supra note 2.
- Smialek & Rappeport, supra note 1.
- Press Release, U.S. Coin Task Force, Statement from the U.S. Coin Task Force on the Coin Circulation Issue (July 24, 2020), https://www.aba.com/-/media/documents/email-bulletins/us-coin-task-force-public-statement-072420.
- Alaa Elassar, A bank is paying people to bring in their spare change to help local businesses amid the coin shortage, CNN BUS. (July 22, 2020), https://www.cnn.com/2020/07/19/us/coin-shortage-banks-paying-trnd/index.html.
- Is it legal for a business in the United States to refuse cash as a form of payment?, FED. RESERVE, https://www.federalreserve.gov/faqs/currency_12772.htm (last visited July 23, 2020).
- Sydney Simone, Shortage of coins in Hooks, Texas, NEXSTAR BROADCASTING (July 13, 2020), https://www.arklatexhomepage.com/news/texarkana-news/shortage-of-coins-in-hooks-texas/.
- Abdel Jimenez, Chicago banks, stores ask for spare change as they deal with national coin shortage, CHI. TR. (July 22, 2020), https://www.chicagotribune.com/coronavirus/ct-coronavirus-illinois-national-coin-shortage-exact-change-cards-20200722-dmm2omer25fixd45c2i2ekmd2m-story.html.
- Cerullo, supra note 3; Duffy, supra note 3; Press Release, Southeastern Grocers, Southeastern Grocers Combats Nationwide Coin Shortage with Community Giving (July 23, 2020), https://www.businesswire.com/news/home/20200723005175/en/.
- Duffy, supra note 3.
- David P. Willis, Coin shortage: COVID-19 stole our change, and this is what stores are doing to get more, USA TODAY (July 19, 2020), https://www.usatoday.com/story/money/2020/07/17/coin-shortage-coronavirus-stole-our-change-and-stores-desperate/5451613002/.
- Eric Escalante, Coin shortage solution? Newman Taco Bell offering a free taco to customers who pay with coin Rolls, ABC 10 (July 26, 2020), https://www.abc10.com/article/news/local/ca-taco-bell-coin-shortage/103-ff4f04c4-35bb-4241-b4b2-71bccdb20019.
- Jimenez, supra note 20.
- Campbell, supra note 7.
- See Id.; Tanya Rivera, ‘If you are a business and you refuse to take cash, you are breaking the law.’
A Mississippi Senator’s Facebook post is getting a lot of response. But is what he’s saying true?, WFNY NEWS 2 (July 20, 2020), https://www.wfmynews2.com/article/news/local/2-wants-to-know/money-cash-card-business-store-refuse-ban-federal-reserve-nc-attorney-general-mississippi-senator-facebook/83-cd4b8606-4491-4a7c-8a9b-5398a9b39b9a.
- FED. TRADE COMM’N, ADVERTISING FAQS: A GUIDE FOR SMALL BUSINESSES (2001), https://www.ftc.gov/tips-advice/business-center/guidance/advertising-faqs-guide-small-business. See, e.g., DEL. CODE ANN. tit. 6, § 2532(a)(9) (“A person engages in a deceptive trade practice when, in the course of a business, vocation, or occupation, that person [a]dvertises goods or services with intent not to sell them as advertised.”); Kansas Consumer Protection Act, KAN. STAT. ANN. § 50-626(b)(7) (“Deceptive acts and practices include, but are not limited to, the following, each of which is hereby declared to be a violation of this act, whether or not any consumer has in fact been misled: making false or misleading representations, knowingly or with reason to know of . . . the price in comparison to the prices of competitors or one’s own price at a past or future time.”).
- Investigations by attorneys general into allegations that businesses charged higher prices at the register than those marked on the shelf have sometimes resulted in large settlements. Though these cases do not involve a coin shortage or returning inadequate change to consumers, they illustrate how pricing discrepancies can be deceptive. See, e.g., Jeff Burbank, Walgreens to pay $1.4 million to settle suit, PALO ALTO ONLINE (Jan. 10, 2013), https://www.paloaltoonline.com/news/2013/01/10/walgreens-to-pay-14-million-to-settle-suit; Press Release, Office of the Att’y Gen. of N.J., New Jersey Division of Consumer Affairs Reaches Settlement with AutoZone Addressing Allegations of Pricing Violations; Prior Actions Against “Advance Auto” and “Pep Boys” Remain Pending (Mar. 29, 2016), https://www.njconsumeraffairs.gov/News/Pages/03292016.aspx.
- Fed. Reserve, supra note 2; Smialek & Rappeport, supra note 1.
- What Grocery and Food Retail Workers Need to Know about COVID-19, Ctrs. for Disease Control & Prevention (Apr. 13, 2020), https://www.cdc.gov/coronavirus/2019-ncov/community/organizations/grocery-food-retail-workers.html.
- Kathleen Elkins, You may not be able to get change at the grocery store—here’s why, CNBC (July 17, 2020), https://www.cnbc.com/2020/07/17/why-you-cant-get-change-at-the-grocery-store-coin-shortage.html.