Fiat Currency

FIAT CURRENCY….I was killing time this afternoon and surfed over to the Volokh Conspiracy, where I found that Eugene, who apparently also has time on his hands, has answered a question from someone who wants to know if it’s legal for a business to refuse to accept bills larger than $20. After all, his questioner says:

“….legally, Starbucks has to accept a $50 for “all debts public and private”. There is also the issue of keeping confidence in a fiat currency, which is in the best interest of the U.S. government.

Personally, I would refuse to be baited by the kind of person who refers to paper notes as “fiat currency,” but hey ? it’s Eugene’s blog and he can do what he likes.

In any case, Eugene’s answer is that if you buy something first and then pay for it (as in a “pump then pay” gas station) they have to accept your $50 bill. However, if you have to pay up front, they can simply refuse to do business with you.

That’s clever, but I’d like to suggest two other answers that are completely unrelated to any knowledge of the law:

  • Stores have been doing this for a long time, and it’s a dead certainty that some loon somewhere has litigated this. So, since many stores continue to have this policy, apparently that person lost.

  • Perhaps the gas station has to accept your $50 bill, but they don’t have to give you change. It’s up to you if you want to do business with a merchant who has this policy.

Any other ideas?

UPDATE: In comments, Anuraq provides a link to the definitive answer to this question direct from the U.S. Treasury:

The pertinent portion of law that applies to your question is the Coinage Act of 1965, specifically Section 102. This is now found in section 392 of Title 31 of the United States Code.

….This statute means that all United States money as identified above are a valid and legal offer of payment for debts when tendered to a creditor. There is, however, no Federal statute mandating that a private business, a person or an organization must accept currency or coins as for payment for goods and/or services. Private businesses are free to develop their own policies on whether or not to accept cash unless there is a State law which says otherwise. For example, a bus line may prohibit payment of fares in pennies or dollar bills. In addition, movie theaters, convenience stores and gas stations may refuse to accept large denomination currency (usually notes above $20) as a matter of policy.

Thanks!

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