Medical marijuana credit union: Senator Pat Steadman on needs & challenges of proposal
The Bank of Denver's decision to close its medical marijuana accounts, following a similar move by Colorado Springs State Bank, has put plenty of MMJ businesses in a tight spot. Senator Pat Steadman is considering legislation to authorize a credit union devoted to the industry. But he's not yet ready to guarantee such a bill will be introduced in the upcoming session, owing to the myriad challenges such a proposal presents.
Steadman confirms that "we're looking at the possibility of creating a credit union. I have been drafting some language to make some adjustments in the credit union statutes that would make it possible to have such a financial institution, and we've been meeting with folks and talking about how this might work, and what the obstacles might be."
The largest of these remain "legal requirements for the FDIC" -- the Federal Deposit Insurance Corporation -- "versus the FCUA" -- the Federal Credit Union Act. "That's banks versus credit unions." Both are federally regulated, and because marijuana remains against federal law, such institutions fear retribution for working with MMJ businesses -- which is why the Bank of Denver and Colorado Springs State Bank have elected to sever ties with such customers. However, Steadman notes, "there are some alternatives in the law for credit unions, and we're looking at some changes to those alternatives to make it work.
"There are some other things about the credit union model that lend itself better to the creation of a financial institution to serve this industry," he continues. "I think their nonprofit status is of interest, and also the fact that their membership would be to a defined class. But what's still not clear is how the federal government is going to view such an institution. And one of my questions is, if we were to create a financial institution to serve this industry, does that in any way increase the likelihood that the federal government would feel the need to start cracking down more in Colorado. Because that's certainly not anything we'd like to see happen."
One reason for concern: U.S. Attorney John Walsh specifically cited objections to an investment fund passage in House Bill 1043, the so-called medical marijuana cleanup bill that Steadman co-sponsored, even though this section had already been removed. Because this concept had come to the fore before the measure reached the Senate, Steadman admits that "I didn't spend a lot of time studying it -- and I hope some of the concerns with it would not be present if a credit union could be established. But those are questions and conversations that we're still having."
On the positive side, Steadman says representatives of the Medical Marijuana Enforcement Division with whom he's spoken advocate launching a financial institution, "because it would facilitate the regulation and accountability we have for this industry for auditing purposes. And I'm hopeful this step would be viewed as one that further facilitates our fairly rigorous scheme.
"I think it's in everyone's interest to have these businesses use a financial institution instead of it being a strictly cash business, with lots of cash changing hands that's harder to audit and trace. The business owners want that, the regulators want that, and you would think even the naysayers would want that."
Still, when asked if he's fully committed to sponsoring such a bill, Steadman defers. "Let's just say I'm very interested in the topic. It's pretty complicated, but we're certainly exploring the possibilities."
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