DENVER — It's time for credit unions to get comfortable with serving the legal marijuana industry.
That was the message at CUNA's America's Credit Union Conference/World Council of CUs (WOCCU) conference here Wednesday during a session focusing on public policy issues around the emerging legal marijuana business.
Partner Colorado CU began serving the pot industry in January, though its research into the issue began in July 2014. PCCU only offers depository services to those businesses, and CEO Sundie Seefried said the $287 million credit union in Arvada currently serves just over 20 legal pot shops, with the goal to grow by about five new businesses a month.
But even hitting that target is a struggle, according to Seefried, because the due diligence takes so long. The average dispensary requires about three weeks of due diligence before the credit union will accept any money, she told CU Journal.
"You have to build a relationship of trust," Seefried said. "You have to know your customer really, really well. You have to have your eye on the businesses, on the owner and on the money."
She also tried to counteract the notion that the only people being affected by this are hippies or basement-dwelling stoners. It's not just dispensaries and growhouses that aren't getting accounts, she said, but other legitimate businesses that interact with the marijuana industry, such as those that make equipment like extraction machines.
Those businesses don't sell marijuana and don't interact with customers, but they're being turned down for accounts and services because they deal with the legal marijuana industry.
Not Personal--It's Business
Seefried said the CU community needs to consider why it's not serving the marijuana industry and leave its personal opinions out of the matter. While some CUs' boards may not be comfortable with it for personal reasons, she reminded that 53% of Coloradans voted to legalize it and the industry faces heavy regulation.
"Credit unions with whom I've spoken that have gone out and surveyed their members have not gotten the negative response," she said, noting that it's actually more dangers to have so much cash on the street. "We're not in it to exercise our moral and ethical beliefs. We're actually in the money-management business. If we don't manage the money, then who will?"
As Credit Union Journal has previously reported,
Credit Union Journal has reached out to Fourth Corner representatives for interviews on multiple occasions but has not received calls back for comment.
'Minor Wins Here and There'
John Lord, a managing partner of dispensary chain LivWell — itself a Partner Colorado member business — also addressed the ACUC/WOCCU crowd, offering a few insights into the struggles these businesses have faced without banking options.
Legal pot businesses must pay their taxes to the IRS in cash, and Lord told the story of carrying a bag of $1.45 million in cash into an IRS office. Once he finally made it through security, it took three employees more than five hours to count all the money because there wasn't a cash-counting machine on site.
"I should be charging them for my time," quipped Lord, who added that the IRS had charged a penalty to those that paid their taxes in cash, but recently lost a court case and had to refund those fees.
"We get minor wins here and there," he said. Since the incident with the $1.45 million in cash, he said the IRS office in Denver has set up a special window for marijuana businesses and schedules appointments.
The industry has created more than 20,500 jobs in Colorado, said Lord, who said he believes "that marijuana was the unsung hero of pulling Colorado out of this recent recession." The state received more than $52 million in taxes and fees last year as a result of legal marijuana — more than half of which benefits schools, he said — and total tax and fee revenues for fiscal year 2015 are projected to exceed $107 million.
And while access to depository services is crucial, these businesses also need services such as payroll assistance, real estate lending, credit card processing and more.
"That's what banking is really all about, not just a vessel to hold the money in," he said. Lord projected that two-thirds of the cash business at legal pot shops will disappear as soon as credit card processing is available.
Classic CU Mission
Seefried told the crowd that beyond just serving a legal, fully regulated industry, there are a number of classic credit union reasons to enter the marijuana banking field. Not only is it a relevant industry, but there is a significant community safety element involved.
If legal marijuana businesses — which operate exclusively in cash — don't have someplace to put their money, that means that business owners are carrying backpacks of cash around town, including to businesses such as Walmart and grocery stores where they can get money orders. That creates the danger of potential robbery or other crimes in areas where children and community members are present, and Seefried said her CU has taken $50 million in cash off the street so far this year.
But the biggest reason to serve these businesses, she said, is a no-brainer: credit unions have a mission to serve the un-banked and the underserved.
"I wonder if credit unions aren't missing an opportunity to do something nobody else wants to do and do it right," she suggested. "We have been chartered to serve the underserved and unbanked, and there's certainly an opportunity here in this market."
And, she added, it could be a gateway to grow membership for personal banking, too.
"We've heard our clients say on several occasions 'I didn't know what a credit union is, but if this is what a credit union is, I really like credit unions,'" Seefried said. Since beginning to offer pot banking services, Partner Colorado has also begun to slowly add owners and employees as members.
