credit union lendingWhile marijuana legalization varies tremendously state to state, all evidence points to an increasingly mainstream adoption of medical marijuana across the US, with over half of the union (30 states) legalizing its use for medicinal purposes. However, with such inconsistent attitudes and varying legalities, those people looking to cash in on the industry are struggling to find the resources and financing they need. New York Governor Andrew Cuomo thinks it's high time we take measures to help these businesses out. 

New York legalized medical marijuana in 2014, and was the 23rd state to do so. However, while the doctors are allowed to prescribe it, finding a dispensary nearby is harder with only a handful available. The reason? It takes a tremendous amount of startup capital, as in $30-50 million. Getting funding and business loans for this growing industry is hard, and getting advice on how to do it without knowing the owners of the big five current dispensaries personally is next to impossible. Additionally, the tax revenue more dispensaries could create is hard to ignore. Earlier this month, Cuomo took a big step in helping others get in the game. 

From the New York State Department of Financial Services press release

"Governor Andrew M. Cuomo... announced further action to support the development of medical marijuana and industrial hemp businesses in New York, directing the Department of Financial Services to provide guidance to support the safe and sound provision of banking services for these businesses. The DFS guidance issued today encourages New York State chartered banks and credit unions to consider establishing banking relationships with medical marijuana-related businesses that are operating in New York in full compliance with all applicable New York State laws and regulations, including the New York Compassionate Care Act, and the applicable regulations and requirements of the New York State Department of Health. Today's guidance also encourages New York State-chartered banks and credit unions to support the development of industrial hemp businesses statewide, continuing this significant economic development goal of New York State...

The Department of Financial Services is aware that the unsettled environment at the federal level has discouraged institutions from providing financial services to companies with medical marijuana or industrial hemp operations. Because marijuana currently is still listed on Schedule I under the Federal Controlled Substances Act, medical marijuana and industrial hemp-related businesses operating in accordance with New York State laws and regulations continue to have difficulty establishing banking relationships at regulated financial institutions."

So what kind of red tape has Cuomo put up in smoke with the new announcement?

DFS advised New York's chartered institutions that it will not impose any regulatory action on any New York State chartered bank or credit union for establishing a banking relationship with a medical marijuana-related business that operates a compliant business in New York, as long as the New York State chartered bank or credit union complies with the requirements of:

  • The 2014 Financial Crimes Enforcement Network guidance;
  • The guidance and priorities set forth in the Department of Justice's 2013 memorandum from Deputy Attorney General James M. Cole;
  • Is subject to the institution's own evaluation of the risks associated with offering products and services and its ability and systems to effectively manage those risks - as all DFS-regulated institutions do with regard to all their banking relationships.

While there is still a large crop of unanswered questions, this industry is not going up in smoke, and the debate will continue across the country. After all, medical marijuana is now legal in 30 states, and recreational marijuana is legal in nine. Regulation changes like the ones put into effect in New York will continue to replicate across the country and are, bluntly, one way to grow your credit union's loan portfolio. 

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Topics: Lending Solutions, Credit Union Best Practices

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