Hello, and welcome to Legal Lad’s Quick and Dirty Tips for a More Lawful Life.
But first, a disclaimer: Although I am an attorney, the legal information in this podcast is not intended to be a substitute for seeking personalized legal advice from an attorney licensed to practice in your jurisdiction. Further, I do not intend to create an attorney-client relationship with any listener.
Today’s topic is a merchant’s obligation to accept cash payments. Kevin from Florida wrote:
[Apple recently announced] that they would NO longer accept cash
payments for an iPhone, [and] only [accept] credit cards. Is this legal to refuse legal
tender in the United States?
Great question Kevin! Apple claims that they are requiring credit cards so they can track purchases to prevent customers from buying the iPhone, unlocking its protection software, and then reselling it. Apple’s recent move has sparked a surprising amount of controversy, and has alienated some customers. The short answer is that a merchant can lawfully require payment in any reasonable form, and Apple’s recent move to require credit cards does not seem to violate any federal law.
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Back to the issue.
Open your wallet or purse and take out a bill. You will notice that every bill contains on the front the phrase “This note is legal tender for all debts, public and private.” The Legal Tender Statute, 31 U.S.C 5103, provides “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. Foreign gold or silver coins are not legal tender for debts.”
Several consumers reacting to Apple’s recent refusal of cash for iPhones have cited to this statute, and the words printed on your money, to argue that Apple’s actions are illegal. I could not find a case where a merchant accepted only credit cards, but several cases upheld other merchants’ no-cash policies.
For example, bus passengers sued the City of New York under the Legal Tender Statute after the City refused to accept cash to ride New York City busses. The bus would only accept tokens issued by the transit authority. First, the court pointed out that a rider can use cash, but must simply do so at a token counter, where the employees issuing the tokens were in a safe location. The court also referred to past cases where other courts had upheld tram companies’ policies to only accept nickels, or to refuse currency that was too large. The court held that the scheme did not violate the Legal Tender Statute because the city was acting reasonably.
A federal court in Texas reached a similar conclusion. The local water district maintained a no-cash policy after several of its offices suffered robberies. The district only accepted cashier’s checks, money orders, or personal checks for some customers. A customer of the water district refused to pay his water bill by money order or cashier’s check, so the district levied fines against him for late payments. The customer sued, arguing that this policy violated the Legal Tender Statute. The court also ruled that the no-cash policy was permissible because it was reasonable to refuse cash after the district offices were robbed, and that there was no reason that the customer could not get a money order, especially given that he worked at a U.S. post office, an office that issues money orders.
Last, a federal court in Virginia ruled that the Legal Tender Statute permitted an apartment management company to maintain a no-cash policy. The court there did not discuss the reasonableness of the management company’s decision, but merely noted in dictum that the Legal Tender Statute only operated to prohibit a company operating in the U.S. from requiring foreign currency.
These cases support the proposition that the Legal Tender Statute does not operate to force merchants to accept cash payments. Under the reasonableness standard that the New York and Texas courts used, Apple would argue that their new policy is reasonably designed to protect their intellectual property and to protect the exclusive license they have with AT&T as the service provider. A court reviewing this would likely agree with Apple. If a court followed the Virginia court, it would not even look into reasonableness, and simply note that the policy does not require customers to pay with foreign currency, and is thus legal.
Some critics of the policy argue that, in order to get a credit card, you must sign a contract with a credit card company. So, forcing you to use a credit card seems worse than simply requiring you to go get a money order, which does not require a contract. But, there is nothing illegal per se about requiring you to sign a contract with a third-party to buy a product or service, so this argument would not go very far.
Overall, Apple’s policy might seem intrusive and annoying, but does not seem illegal. The remedy here, as is often the remedy in the world of capitalism, is to refuse to patronize Apple.
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