DENVER — Fourth Corner CU, the new Colorado state charter aimed at serving the legal marijuana industry in the state, reportedly will open for business Jan. 1, regardless of whether it has deposit insurance in place at that time.
Fourth Corner is the first credit union to be chartered in Colorado in more than a decade, and Commissioner Chris Myklebust told Credit Union Journal that the decision to approve the charter was based on Fourth Corner's plan to serve a legal industry in the state.
"We've been looking for solutions to the licensed marijuana business banking for years now, and my feeling is that they're legitimately licensed, legal businesses under Colorado law, and they deserve nothing less than the full faith and credit of the United States government to back their deposits," he said.
Fourth Corner may have a charter, but it hasn't yet been approved for federal deposit insurance from NCUA — a process that may take as much as two years.
"Review of insurance applications is comprehensive and methodical and so can take some time" NCUA spokesman John Fairbanks said in an e-mail to Credit Union Journal. "The safety and soundness of the credit union is the focus, and NCUA's review includes considerations that include the credit union's funding, the quality of its management — particularly in the area of financial expertise — the state of its financial operations, and its field of membership."
Representatives from Fourth Corner did not respond to multiple requests for comment from Credit Union Journal.
Fairbanks could not confirm if Fourth Corner has applied for federal deposit insurance — or even say if the regulator would be willing to insure such a credit union. In most cases, a credit union without insurance from NCUA could apply for private insurance, but state-chartered CUs in the Rocky Mountain state are prohibited from seeking private insurance.
While Colorado's commissioner can approve a comparable insurance for a credit union, said Myklebust, "the policy of this division going back many years — and I hold to it as well — is that there isn't any private insurance out there that has the full faith and credit of the United States government behind it, therefore there is no comparable insurance. Therefore I would not allow for private insurance as long as the NCUA is an option."
A loophole in Colorado's law allows credit unions to open as long as they have applied for insurance, even if it hasn't been approved, and Fourth Corner reportedly plans to open for business on the first of the year.
Myklebust declined to speculate on possible scenarios if NCUA doesn't approve Fourth Corner for insurance.
"Right now federal deposit insurance is the only option; we're not considering anything other than that right now," he said.
Despite being the first new CU in Colorado in more than a decade, the Mountain West CU Association — the joint league serving Colorado, Wyoming and Arizona — has taken a "wait-and-see" approach on the matter.
A statement from MWCUA CEO Scott Earl said that the league continues to monitor "the challenge[s] of providing financial services to business in this industry," and that it would continue to monitor developments on Fourth Corner's formation process as NCUA considers its application for deposit insurance.
Myklebust said that the chartering process for Fourth Corner was no different than for any other credit union, despite the fact that marijuana is still illegal in most of the country.
"There was no prejudice based on the fact that they want to serve the marijuana industry," he said. "In fact, just from a public safety perspective, we want to see this cash off the street."
