- Key insight: The bill would let businesses and banks round cash transactions to the nearest five cents.
- Forward look: President Donald Trump is expected to sign the bill into law.
- What's at stake: Without the bill, banks might have had to absorb the cost of rounding every cash transaction.
UPDATE: This story includes quotes from interviews with representatives of the American Bankers Association and the National Retail Federation.
WASHINGTON — The Senate passed the Common Cents Act, which will make it easier for banks to adapt to the end of penny production, sending the bill to be signed into law by President Donald Trump.
With the discontinuation of the penny, the bill will allow retailers and financial institutions to round cash transactions to the nearest nickel. It formalizes Trump's policy of ordering the penny to stop being made, but does not affect the value of existing pennies.
Banks and other financial firms generally support the bill.
"We're very pleased with the results," Steve Kenneally, a senior vice president at the American Bankers Association, told American Banker. "I think the most important thing is that it's going to bring consistency to transactions."
In a written statement, the ABA said the bill "establishes a clear and practical framework for cash rounding when exact change cannot be provided while making clear that checks, credit cards and other noncash payment methods are not subject to rounding."
About a year ago, groups representing banks in Washington had pushed back when the Treasury Department and Federal Reserve started
When regional Fed banks stopped accepting penny deposits or orders at many coin-terminal locations across the country, the American Bankers Association
The Fed eventually
"Towards the end of last year, we were getting a lot of calls about banks struggling to be able to provide pennies to their customers," Kenneally said. "Those have really trailed off."
The Senate–passed bill adds new language to a previous version that was approved by the House. The recently added provisions require the Treasury Department to notify Congress 60 days before discontinuing any circulating coin, and allow the Treasury secretary to look at new compositions for nickel manufacturing to save costs.
The latest version of the legislation, which was approved by unanimous consent in the Senate, has already passed the House.
In a note, TD Cowen analyst Jaret Seiberg said the bill is a positive for both banks and retailers alike.
"Without it, banks and merchants would have needed to incur the cost of rounding every cash transaction in favor of the customer in order to limit the risk of being sued," he said.
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Retailers had been particularly concerned about such lawsuits. Without a clear national standard for price rounding, stores feared they'd end up charging one price for customers paying electronically and another price for those paying with cash — which is barred by a number of federal, state and local laws.
The Common Cents Act, retailers say, offers protection on this front. Not only does it provide clear rules for when and how to round prices, but it explicitly says those rules trump any other laws on the subject.
"We think it's great," said Dylan Jeon, senior director of government relations at the National Retail Federation. "Not only for our folks in providing that clarity on how to round, but also giving them the peace of mind that … they won't be targeted or penalized for having to implement rounding practices."
Passing a bill that included the most important measures for retailers was a long and difficult process, Jeon said. But after more than a year and multiple versions of the legislation — technically, the House and Senate each passed it twice — the efforts of multiple industries and lawmakers finally got it over the line.
"It's sort of rare that you see retail and banks working together on something," Jeon said. "But I think this was a bill that just made too much sense and was a necessity for a lot of businesses in the economy."
On that point, Kenneally agreed.
"Banks love consistency, and I think consumers love consistency, and retailers love consistency," he said. "And that's what this legislation delivers."
