By Bret Evans
I recently did my first podcast, on the wonderful world of non-circulating legal tender (NCLT) coins (to listen, click here).
Whenever I hear those words, I always do a quick check for the exits, because it rarely ends well. The good news is that this time Canada came out looking pretty good.
For those of you who don’t know, NCLT describes all those coins which have a dollar value, but never see use as money.
It includes commemorative coins from the Olympics, the scores of gold and silver coins issued each month, and even provides a technical basement for bullion issues. You can laugh at that, but I remember a time when the $5 face value of a silver maple was higher than the melt value. It also includes the wildly popular series of face value issues, such as the $20 for $20 coins. Those issues are popular because, unlike most NCLT issues, the purchase price is the same as the issue price and because it could go up in value, it creates the idea of a zero risk investment.
That program was so successful, both in terms of sales and the acquisition of new customers, that it has been expanded by the Royal Canadian Mint and copied by others. Among those copycats is none other than the venerable Royal Mint, mother of our own.
What the Mint folks in Britain did was issue their own series of face value coins, and then pull the rug out from under the feet of anyone who purchased one by telling banks not to honour them when presented. What happened was that an enterprising individual saw an opportunity to buy the coins on his credit card, then return them for the face value, and pay off the card immediately before any interest charges were assessed. The result, free points on his credit card!
Okay, I have to admit it sounds pretty cool, even though I don’t have a lot of sympathy for someone who is trying to get something for nothing. I was more appalled at the Royal Mint, which sent out a memorandum to banks saying that yes they were legal tender, but that they were not to be accepted as money. The exact wording was that the coins were “issued for commemorative purposes only and are not intended to be used as cash.”
The Royal Mint said anyone wanting money for them should be sent to the Royal Mint, who would only accept coins returned in their original packaging, along with proof of purchase.
Yeah, that sort of stunned me too. That was the reason for the podcast, done with Charles Morgan, editor of Coin Week.
Morgan wanted to know a bit about the Canadian experience.
I explained that while it can be very difficult to get the money back from Canadian NCLT coins, it is at least possible. In the case of the face value series, the RCM has encouraged the banks to accept them and even promised to make sure they get their money. Kind of a nice move, since the government of Canada has allowed the RCM to place a value on the coins, and authorized it under a Canadian law – The Currency Act.
We’ve been fighting the NCLT battle since the 1990s. I think the RCM’s stance can be credited to the actions not only of Canadian Coin News over the years, but of Robert Aaron at the Toronto Star, and the straight talk from members of the Canadian Association of Numismatic Dealers.
In our case the problem is that the NCLT issues don’t fit in the machine intensive coin handling system. Bank workers don’t always know the procedures, and in some cases just can’t be bothered. To be honest, I’m sure the RCM would prefer it if nobody returned any NCLT issue, ever. With all the NCLT that comes out each year, I don’t know what would happen if there was a rush to cash them all in at once.
The Royal Mint let their fear drive their thinking, and the result is a disaster. The right thing for them to do would be to limit the number that can be purchased by a single individual to reduce their exposure.
Instead, they have undermined the entire commemorative program of one of the most respected Mint’s in the world.
Today, it is good to be Canadian.