WASHINGTON — While the issue of changing the metal composition of coins has come up here frequently in recent years as a means to save money, the U.S. Mint believes that changing the composition of quarters—the coin at the heart of most self-service laundry operations—is not a viable alternative because doing so would increase the potential for fraud.
This comes from a report, U.S. Coins: Implications of Changing Metal Compositions, issued by the U.S. Government Accountability Office (GAO).
Several years ago, metal prices rose to the point where the unit costs of a penny and nickel exceeded their face value. In other words, it cost more to produce a penny or a nickel than the currency value it held. The U.S. Mint was directed by statute to develop and evaluate the use of new metals that would reduce the costs of coin production while minimizing the impact on coin-accepting equipment.
The U.S. Department of Treasury is authorized to recommend coin changes to Congress based on U.S. Mint’s analysis but has not yet done so. GAO was asked by “congressional requesters” to examine the Mint’s efforts.
The U.S. Mint estimates that the government could save between $8 million and $39 million per year by changing the metal composition of the nickel, dime and quarter to a plated, steel-based coin. But it has determined that it is not viable to change the quarter because less valuable foreign coins would have similar characteristics to a steel quarter and could then be used as counterfeit quarters.
Associations representing selected industries that use coin acceptance machines estimated a cost impact ranging from $2.4 billion to $10 billion to modify an estimated 22 million coin machines, such as vending machines, to accommodate steel-based coins, the GAO report says.
But the GAO found the estimates may be overstated for several reasons. The vending industry assumed 7 million vending machines would require modification, but a 2015 industry study estimated there are 4.5 million vending machines in the United States. Also, the cost estimates assumed steel changes to all coins, but because of fraud concerns related to changing the quarter, machines that only accept quarters (such as coin laundry machines) would not require modification, the GAO report says.
There are an estimated 1.6 million coin laundry machines in use today, according to estimates provided to the GAO.
In researching the issue, the GAO selected a group of 11 industry stakeholders, including the Coin Laundry Association (CLA), to contact for their input.
Coin laundry representatives said “there would be few opportunities for updating and replacing of coin machines since washers and dryers tend to be in-service without failure for a minimum of 12 to 15 years,” the report said.
The GAO asked several stakeholders, including the CLA, if shifting to a coinless business model would carry a lower cost than having to make machine modifications. Coin laundry industry representatives stated that moving to a coinless business “may increase, not decrease, costs because of the substantial capital investment needed to install the necessary infrastructure (i.e., payment mechanisms, Internet, modem, Wi-Fi, and associated wiring) to move to a coinless system,” the report said.
Also, some reps said the coin laundry industry serves “unbanked” individuals who do not have or use bank accounts, debit cards and other banking services and therefore may prefer using only coin-operated laundry machines.
The Coin Modernization, Oversight and Continuity Act of 2010 requires that the Secretary of the Treasury submit a biennial report to Congress “analyzing production costs for each circulating coin, cost trends for such production, and possible new metallic materials or technologies for the production of circulating coins.”
The U.S. Mint plans to issue its latest report this month. According to U.S. Mint officials, the 2016 report will highlight areas of study to include further testing and evaluation of the new cupronickel alloy, stainless steel research and development, improvements in production, and outreach to the coin industry, among other things.
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].