Cannabis Credit Union Denied By the Fed, Files Lawsuit

An upstart credit union that hoped to serve the marijuana industry and had state backing has been denied a master account by the U.S. Federal Reserve, which threatens to close another avenue for cannabis businesses seeking a bank account.

The Fourth Corner Credit Union in Colorado was reportedly informed earlier this month that it wasn’t approved for the master account by the Kansas City Fed. On Thursday night, it filed a lawsuit in federal court challenging the decision, saying it wants “equal access” to the financial system, according to the New York Times.

Because of marijuana’s classification as a Schedule I drug, banks are hesitant to do business within the industry. Chartered financial institutions must have a master account at a designated reserve bank to operate.

Fourth Corner’s denial is the latest setback for marijuana companies looking for a bank. Oregon’s MBank in April said it’s closing all of its cannabis accounts due to the high cost of compliance. First Security Bank of Nevada in May said it will no longer take deposits from the sale of cannabis, also because of compliance issues.

Fourth Corner received a charter from the state of Colorado in November. At the time, it said it was waiting on the National Credit Union Administration to sign off on insurance and for the Fed to issue a master account.

It had hoped to be open by Jan. 1. Fourth Corner executive Deirdra O’Gorman told Marijuana Business Daily in April that she’d had discussions with the Fed, which she took it as a positive sign.

Industry leaders and government officials met with KC Fed President Esther George earlier this year to discuss the difficulties of banking, but that meeting bore little fruit.

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3 comments on “Cannabis Credit Union Denied By the Fed, Files Lawsuit

    Question: where can I get information about the laws that colorado has that allow individuals to grow marjuna on their own residential property?

  2. Paul Esch on

    There are two sound financial reasons the Fed refused to give a master Fed clearing account to Fourth Corner Credit Union (“FCCU”).

    The first reason is the lack of deposit insurance for FCCU. The NCUA, which regulates credit unions, has not yet allowed FCCU to obtain federal deposit insurance. American Share Insurance, the only private deposit insurer, provides credit union deposit insurance in 9 states. Colorado is not one of them. Why should FCCU be the only totally uninsured credit union in the US to have a Fed clearing account?

    The second reason to deny FCCU a Fed clearing account is related to the charter of this credit union itself. According to all news reports, the FCCU charter limits its membership to Colorado licensed marijuana firms, and to non-profit firms and individual advocates of marijuana law reform.

    Credit unions exist both to take deposits and to lend to their members. A credit union is not following its legal mandate if it simply leaves all of its assets on deposit in a Fed clearing account. Ignore the fact that the Colorado licensed marijuana is illegal under federal law. Concentrating 100% of loan assets in one industry is always unsafe and unsound banking.

    I predict that FCCU will get nowhere in its lawsuit against the FED.

    • Dan Jones on

      Nearly all of the statements you made in your comment are not factually accurate, which leads one to believe you are commenting for reasons other than trying to have a dialog about the status of this credit union.

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