A credit union, based in Colorado that was formed to serve the country’s fast-growing legal marijuana industry sued banking regulators when denied access to the nation’s electronic banking system on Thursday.
Two lawsuits recently filed in Denver seek to overturn decisions made by the Federal Reserve and the National Credit Union Administration, disallowing the marijuana-centric Forth Corner Credit Union from operating.
And this is the more reason the credit union is asking for equal access to the financial system so that marijuana businesses could operate without restrictions, because they are now at a disadvantage.
Federal Reserve Bank of Kansas City denied it a master account, which is identified by the primary nine-digit routing transit number, and the credit union can not operate without insurance or a master account.
One Denver-area credit union is learning how to deal with rejection amid a haze of rules about how financial institutions can interact with businesses which legally sell marijuana.
The decision means many pot businesses still use banking work-arounds such as paying their power bills with money orders and spritzing cash with air freshener to avoid bank detection. For even renovation of stores, looking for cash becomes troublesome. When a pot business wants to expand perhaps by building a new warehouse or renovating a storefront it typically has to find a cash investor willing to accept the risk of fronting money to a business that’s illegal under federal law, usually in exchange for a steep interest rate.
Nearly all payments stemming from marijuana businesses in Colorado are done in cash. It’s why Colorado banking regulators had proposed a credit union like Fourth Corner.
The credit union already received the license to function from the state of Colorado previous year. They filed one separate lawsuit against the NCUA so as to federally insure the bank, and also filed another against the Federal Reserve Bank of Kansas City.
Other federal agencies are starting to talk about the marijuana industry’s finances, though.