Cannabis credit co-ops unlikely to gain traction without federal signoff
Steamboat Springs — The most recent attempt by Colorado legislators to allow marijuana businesses access to financial services is a nice token gesture, according to those in the industry, but in reality will do little to change the status quo of secretive bank accounts and large amounts of cash changing hands.
House Bill 1398, which Gov. John Hickenlooper signed into law earlier this month, provides for the establishment of cannabis credit co-ops — essentially credit unions specifically for marijuana businesses.
But the idea is a nonstarter without access to the Federal Reserve System, which regulates the electronic transfer services that would make the co-ops viable.
There’s been no indication that access will be granted.
Without the ability to offer services on par with a bank or credit union (such as direct deposit, electronic bill pay and electronic submission of taxes, to say nothing of federal insurance for deposits), the co-ops aren’t much good, said Kevin Fisher, co-owner of Rocky Mountain Remedies.
Fisher’s business already has a bank account and accepts debit cards, he said, and he doesn’t anticipate many in the industry will participate in co-ops should they attempt to form. No one has approached Rocky Mountain Remedies about joining a co-op, he said.
“I generally don’t believe it’s going to change anything,” Tim Borden, chairman of the board of Yampa Valley Bank, said about the bill allowing cannabis credit co-ops. “About the only way this problem is going to get fixed is through federal legislation.”
Borden said that Yampa Valley Bank has sided with guidance from its own counsel and banking associations that urges banks to stay away from marijuana businesses.
Cannabis still is a Schedule I controlled substance on the federal level, and recent guidance from the Treasury Department and the Justice Department has not put Colorado banks at ease. Borden said the guidance that came earlier this year placed too much of a regulatory burden on banks to make sure their clients were not participating in any activity illegal at the state level.
Fisher said he knows of one bank that wanted a $10,000 per month fee for the extra regulatory burden, but in Massachusetts, where he is involved in another medical marijuana business, he was able to easily and openly find a bank account.
He’s not against an extra fee for the regulatory burden if it’s reasonable, Fisher said.
“Of course there’s additional compliance issues,” he said. “That’s what banks do.”
Companies recently have sprung up offering to handle regulatory activities as a third party between banks and marijuana businesses, but it remains to be seen how popular this model becomes. Fisher and Borden have heard of the model but do not have any personal experience with it.
Borden said he is concerned about marijuana businesses and their employees, who are working in a legitimate industry by state standards but might face risks not seen in other professions.
“We feel very strongly that something should be done,” Borden said about himself and the board of Yampa Valley Bank.
“It’s going to take the administration to accept marijuana the way these states have done,” he said. “It is the only way it’s going to get changed.”