Pennsylvania became the 24th state (including the District of Columbia) to legalize medical marijuana after Democratic Governor Tom Wolf signed a bill over the weekend, but CUs aren't lining up to serve these now-legitimate businesses.
According to the governor's office, the Pennsylvania Department of Health will commence the process of implementing the state's Medical Marijuana Program – which is expected to take 18 to 24 months.
The Pennsylvania Credit Union Association (PCUA) noted that medical marijuana, when it can be offered at dispensaries, will be used to treat people with seventeen qualifying medical conditions, such as cancer; epilepsy; PTSD; assorted neurological and gastrointestinal disorders; and autism, among others.
However, given the controversy surrounding the use of marijuana (even as a medicinal treatment) and legal confusion arising from the fact that the Federal Government remains opposed to the drug's legalization, it is doubtful financial institutions in the state of Pennsylvania, including credit unions, will be rushing to offer their services to marijuana firms any time soon.
Michael Wishnow, senior vice president, marketing & communications at PCUA, told Credit Union Journal his organization hasn't had any inquiries from Pennsylvania-based credit unions about offering financial services to marijuana businesses yet. But he added "it's still early."
But even if any credit unions in the state are interested in serving such businesses, there would "probably be some compliance hurdles to overcome," Wishnow added.
Indeed, given that marijuana remains illegal under federal law, most banks and credit unions remain unwilling to jump into the fray.
Some credit unions based in Pennsylvania reached by CU Journal did not wish to comment on this topic. Others were noncommittal.
Tara Houser, VP of marketing at First Capital FCU, a $168-million institution based in York, Pa. said: "We are still trying to process the news and the effect it may have on our credit union membership. We want to make sure we do our due diligence before making any decisions." Another Pennsylvania CU, a faith-based entity, said that marijuana laws were not relevant to its membership.
Credit unions and banks face a number of obstacles in providing services to marijuana companies.
Earlier this year, as CU Journal reported, a federal judge rejected a legal challenge by a credit union based in Colorado, Fourth Corner Credit Union of Denver, which was established to serve the marijuana industry but was subsequently denied access to the U.S. payment system.
Fourth Corner CU was organized in 2014 to provide banking services to state-licensed pot businesses, and was granted a state credit union charter. However, the Federal Reserve Bank of Kansas City denied the credit union's application to open a "master account." Those applications are normally approved as a matter of course within a few days, and are necessary for the electronic transfer of funds.
In response, Fourth Corner CU the Kansas City Fed, asking U.S. District Judge R. Brooke Jackson to issue an injunction that would result in the approval of its application. But the judge issued a ruling denying Fourth Corner CU's request for an injunction.
"A federal court cannot look the other way. I regard the situation as untenable and hope that it will soon be addressed and resolved by Congress," Jackson wrote in his decision.
However, as more and more states seek to legalize the use of medical marijuana, pressure will likely increase on Washington to legalize pot across the country – a move that would catalyze the entry of banks and credit unions into making loans to businesses that are engaged in the pot industry.
Taylor West, deputy director of the National Cannabis Industry Association, a pot lobbyist, lamented that because 2016 is a presidential election year, lawmakers will be reluctant to seek to pass any bills that are remotely controversial.
"There's no question that these measures [to give marijuana businesses access to financial service companies] have bipartisan support. The problem is more the general dysfunction of Congress," West said. "I am more optimistic looking past November 2016."
Confusing matters even more is that the Justice Department and the Financial Crimes Enforcement Network published guidelines in 2014 which permit lenders to serve marijuana businesses if they obey strict rules on oversight and reporting. As of July 31, 2015, there were 266 depository institutions nationwide that had open accounts with marijuana businesses, while 388 have served marijuana companies at some point, according to the FinCEN document obtained through a FOIA request.
