Five Below stores in Michigan overcharged customers regularly between August and November 2025. Shoppers discovered items marked with Five Below’s $5 price tag actually cost $6 or $7 at checkout. State regulators documented 18 overcharging cases across nearly 20 store locations—these weren’t random mistakes but serious breakdowns in price verification systems.
Overcharging hurts budget-conscious, cash-paying customers who are already struggling with economic hardship. Five Below promised to address these issues in June 2025, following initial complaints, by implementing audits, retraining workers, and introducing new verification systems. The company failed to deliver.
Overcharging continued through November, with eight different stores charging too much in October alone. Michigan Attorney General Dana Nessel took action on November 20, 2025, issuing a “Notice of Intended Action” against Five Below for violating state consumer protection laws.
The company faces penalties of up to $1,000 per violation, with repeat offenses incurring an additional $5,000 each. Five Below must negotiate compliance by December 15 or face lawsuits. The timing matters because the holiday shopping season arrives when struggling families need fair prices most.
Why Discount Retailers Struggle With Pricing—And the Penny Crisis
Five Below operates approximately 1,800 stores across 44 states, serving budget-conscious shoppers in cities and suburbs. Unlike Walmart and Target, which employ large specialized pricing teams, Five Below lacks equivalent infrastructure and oversight.
Discount retailers in low-income neighborhoods receive less stringent government monitoring than major chain stores, making overcharging easier to conceal. Regulators nationwide barely watch discount retailers, raising serious questions about whether similar problems exist in other states. Consumer advocates warn that Five Below’s overcharging will hurt low-income shoppers the most, as these customers often cannot easily switch stores or choose alternative payment methods.
Five Below’s troubles arrive alongside a historic crisis in American retail: the penny shortage. In May 2025, the U.S. Treasury ceased ordering penny blanks, marking the end of 232 years of penny production. Each penny costs taxpayers 3.69 cents to manufacture—nearly four times its face value.
In November 2025, production of pennies stopped completely. Stores now face a major problem: how do they handle cash payments without America’s smallest coin? The solution requires rounding all cash purchases to the nearest nickel. The Federal Reserve calculated that this “rounding tax” will cost U.S. consumers approximately $6 million annually across all retailers.
Although small per transaction, this money is shifted directly from cash-paying customers to store profits. Major retailers, including Kroger, Home Depot, and Kwik Trip, posted signs requesting exact change or requiring card payments. Kwik Trip, operating 850 stores across the Midwest, decided to round down and accept financial losses to maintain customer loyalty.
Retail groups have begged Congress to create uniform rounding rules, as ten states actually prohibit rounding, creating massive legal confusion across the country.
What Five Below Does Next Matters
The penny shortage actually gives Five Below a convenient escape route. Federal law requires rounding, which means the company can disguise compliance fixes as “penny-free transitions” instead of admitting to fixing overcharging problems.
Five Below could install new software, update scanning equipment, and retrain employees—but label everything as adapting to the penny shortage rather than correcting the behavior that Michigan regulators had demanded. Regulators watch carefully, though. If Five Below hides compliance changes as “business as usual,” regulators will pursue enforcement action aggressively.
Five Below stayed silent as of late November regarding the Michigan action. The company announced December 3 earnings showing 23 percent revenue growth, but said nothing about regulatory troubles. Analysts expected strong performance, noting 14.3 percent sales growth in Q3 2025 and plans to open 150 new stores in 2026.
Some analysts worried that the overcharging scandal would damage customer loyalty in price-sensitive markets. Credit analysts believe that Michigan settlements could establish a precedent in California, New York, Illinois, and Texas—potentially significantly increasing compliance expenses.
Five Below’s executives face mounting pressure from multiple directions: investors question whether fines will reduce profits, store managers fear personal liability, and Michigan regulators demonstrate enforcement power. Five Below’s December 15 response reveals its true choice: rebuild customer trust during the penny transition or hide overcharges within transition chaos.
The scandal forces a reckoning about the value of honesty at discount retailers nationwide. When penny-free retail arrives in January 2026, shoppers will encounter either standardized, auditable rounding and real verification improvements—or subtle exploitation masked by transition confusion. Five Below’s decision signals whether discount retailers will prioritize customer fairness or corporate profit protection.
Sources
Michigan Attorney General, November 20, 2025
CBS News Detroit, November 21, 2025
Reuters, May 22, 2025
Federal Reserve Bank of Richmond, July 10, 2025
SimplyWall.st, November 23, 2025
Investing.com, December 3, 2025