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A bit of sleuthing into Colorado state law has unearthed a game-changing quirk in the wording of a 1981 law governing credit unions. And that quirk could be about to give rise to the world’s first credit union for the marijuana industry.
This quirk did not go unnoticed by eagle-eyed attorneys representing Fourth Corner Credit Union, who brought the possible loophole to the attention of state financial services commissioner Chris Myklebust, who upon intense deliberation, conceded the credit union had satisfied the requirements and granted them a charter in July, according to a Denver Post report.
The specific portion of the law that interested the lawyers read: “No credit union shall be granted a charter by the commissioner unless such credit union has applied for (NCUA) insurance on its shares and deposits” (emphasis ours.) The wording of the law essentially states that credit unions could be granted a charter to operate as long as they’ve applied for the appropriate protections for would-be deposits, which Fourth Corner Credit Union had done. It was on that basis they were approved.
Before opening its vaults to customers, which could start as early as January, the credit union needs to secure a master account to obtain access to the Federal Reserve payments system as well as insurance from the National Credit Union Administration to guarantee deposits. Approval could take as long as two years, but the credit union could continue to operate in the interim. Mark Mason, an attorney who represents Fourth Corner Credit Union, told the Denver Post that it had received a bank routing transit number from the American Bankers Association after receiving its charter.
Fourth Corner organizers told the Denver Business Journal that they expect to receive the insurance master account from the Federal Reserve required to operate, and said when open it initially plans to offer basic banking services to those in the marijuana industry such as “opening accounts and accepting and validating deposits from either non-cannabis businesses or lawful marijuana payments.” It could eventually expand its service offerings, pending increased cooperation from the federal government.
This comes as welcome news to the legal marijuana community, whose battle for legitimacy continues as difficulty obtaining banking services has been an early hallmark of legalization.
“I’m keeping my fingers crossed that this loophole will be what we need to get us through the next few years. To actually have a place that will take our money and work with us and allow us to pay our employees is safer than what we’re doing now,” said Jamie Perino, co-owner of Euflora dispensary in Denver.
Because of the precarious legal niche recreational marijuana currently occupies — now legal in four states and D.C. but still illegal at the federal level — banks, which require federal insurance to operate, have held back on involving themselves with the marijuana industry.
Because of this, Perino says her own personal bank accounts and credit cards have also been closed, merely for her association with the marijuana industry.
“They pretty much blacklist you,” Perino said. “They say it’s a high-risk account with high volumes of cash going through and due to regulations they can’t accept deposits anymore. They shut down my credit cards and said ‘you no longer have credit with us.’
Many young businesses rely heavily on lines of credit to grow to scale, so a lack of full-fledged banking services not only causes continual headaches for existing dispensaries, but also has a chilling effect on would-be cannabusiness entrepreneurs thinking about opening shop.
Sally Vander Veer, CFO of the Medicine Man, one of the world’s largest single dispensaries, agrees.
“I think it’s a huge barrier to entry for people just getting into the market. If I were getting into it today I would have to think a lot about it.”
Fourth Corner apparently has supporters in high places, too. According to the Post, Gov. John Hickenlooper’s office called the charter “the end of the line” for the state’ in dealing with the marijuana industry’s banking difficulties. Commissioner Myklebust himself called the approval of the charter “a huge deal” for Colorado business.
The makeup of Fourth Corner’s board of directors runs the gamut, including members from the local business community to the military community to the cannabis advocacy community. According to the Post’s report, if the union is denied deposit insurance by the NCUA, it has several options; liquidation, merge with another existing credit union or attempt to pass a state law that would allow credit unions to operate under private insurance.
A bit of sleuthing into Colorado state law has unearthed a game-changing quirk in the wording of a 1981 law governing credit unions. And that quirk could be about to give rise to the world’s first credit union for the marijuana industry.
This quirk did not go unnoticed by eagle-eyed attorneys representing Fourth Corner Credit Union, who brought the possible loophole to the attention of state financial services commissioner Chris Myklebust, who upon intense deliberation, conceded the credit union had satisfied the requirements and granted them a charter in July, according to a Denver Post report.
The specific portion of the law that interested the lawyers read: “No credit union shall be granted a charter by the commissioner unless such credit union has applied for (NCUA) insurance on its shares and deposits” (emphasis ours.) The wording of the law essentially states that credit unions could be granted a charter to operate as long as they’ve applied for the appropriate protections for would-be deposits, which Fourth Corner Credit Union had done. It was on that basis they were approved.
Before opening its vaults to customers, which could start as early as January, the credit union needs to secure a master account to obtain access to the Federal Reserve payments system as well as insurance from the National Credit Union Administration to guarantee deposits. Approval could take as long as two years, but the credit union could continue to operate in the interim. Mark Mason, an attorney who represents Fourth Corner Credit Union, told the Denver Post that it had received a bank routing transit number from the American Bankers Association after receiving its charter.
Fourth Corner organizers told the Denver Business Journal that they expect to receive the insurance master account from the Federal Reserve required to operate, and said when open it initially plans to offer basic banking services to those in the marijuana industry such as “opening accounts and accepting and validating deposits from either non-cannabis businesses or lawful marijuana payments.” It could eventually expand its service offerings, pending increased cooperation from the federal government.
This comes as welcome news to the legal marijuana community, whose battle for legitimacy continues as difficulty obtaining banking services has been an early hallmark of legalization.
“I’m keeping my fingers crossed that this loophole will be what we need to get us through the next few years. To actually have a place that will take our money and work with us and allow us to pay our employees is safer than what we’re doing now,” said Jamie Perino, co-owner of Euflora dispensary in Denver.
Because of the precarious legal niche recreational marijuana currently occupies — now legal in four states and D.C. but still illegal at the federal level — banks, which require federal insurance to operate, have held back on involving themselves with the marijuana industry.
Because of this, Perino says her own personal bank accounts and credit cards have also been closed, merely for her association with the marijuana industry.
“They pretty much blacklist you,” Perino said. “They say it’s a high-risk account with high volumes of cash going through and due to regulations they can’t accept deposits anymore. They shut down my credit cards and said ‘you no longer have credit with us.’
Many young businesses rely heavily on lines of credit to grow to scale, so a lack of full-fledged banking services not only causes continual headaches for existing dispensaries, but also has a chilling effect on would-be cannabusiness entrepreneurs thinking about opening shop.
Sally Vander Veer, CFO of the Medicine Man, one of the world’s largest single dispensaries, agrees.
“I think it’s a huge barrier to entry for people just getting into the market. If I were getting into it today I would have to think a lot about it.”
Fourth Corner apparently has supporters in high places, too. According to the Post, Gov. John Hickenlooper’s office called the charter “the end of the line” for the state’ in dealing with the marijuana industry’s banking difficulties. Commissioner Myklebust himself called the approval of the charter “a huge deal” for Colorado business.
The makeup of Fourth Corner’s board of directors runs the gamut, including members from the local business community to the military community to the cannabis advocacy community. According to the Post’s report, if the union is denied deposit insurance by the NCUA, it has several options; liquidation, merge with another existing credit union or attempt to pass a state law that would allow credit unions to operate under private insurance.