Banking & Finance  July 31, 2015

Pot credit union sues Feds, NCUA over denial of master account, insurance

DENVER — The Fourth Corner Credit Union in Denver filed a pair of lawsuits Thursday against the Federal Reserve Bank of Kansas City and the National Credit Union Administration after being denied a master account from the Feds and federal share deposit insurance from the administration.

The master account and insurance is needed for the credit union to be the first to serve the banking needs of the fast-growing marijuana industry in Colorado. The master account makes it possible to take credit- and debit-card payments and move money electronically.

The New York Times reported that the Fed’s branch in Kansas City privately informed the credit union earlier this month that it had not been approved for a master account.

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Although recreational marijuana is legal in Colorado, it is still illegal on the federal level, discouraging most traditional banks from working with pot businesses.

The credit union is supported by a group of attorneys led by Mark Mason in South Carolina, business owners and industry advocates.

In November, Colorado’s Division of Financial Services issued the credit union a state charter. In court documents, the credit union contends that according to federal law, “access to the Federal Reserve payments system must be granted,” and that the Federal Reserve Bank in Kansas City “does not have the jurisdiction to second-guess Colorado DFS, or to reject its determination.”

In the lawsuit against the National Credit Union Administration, attorneys said the administration carried out a “nefarious scheme to unlawfully block the credit union from the Federal Reserve payment system.” It also contends that the administration “leaked its findings to the FRB-KC” to seek to block the credit union’s application for the master account. Court documents explain that the credit union could access insurance from private entities.

Colorado’s state government has said that the lack of access to banks is a public-safety issue, as well as a deterrent in the state’s effort to collect taxes. In January, the credit union leased space for its first branch at 1275 Tremont Place in Denver, a 2,100-square-foot space previously occupied by Colorado Business Bank.

U.S. Rep. Jared Polis, D-Colo., in a prepared statement, called the Fed’s decision “disappointing and a significant setback for legal Colorado marijuana businesses hoping to gain access to the banking system.

“It was within the Fed’s discretion to allow this master account and help ease a longstanding problem in Colorado — a problem that has created enormous public safety, taxation and economic challenges for hundreds of legal and regulated businesses that are forced to operate on a dangerous cash-only system.

“While this wouldn’t have solved the problem entirely, it would’ve been a positive step in the right direction,” he added.

Polis, along with other Colorado politicians, are urging Congress to pass the Marijuana Business Access to Banking Act, which would allow banks, credit unions and other depository institutions the legal clearance to provide banking services to state-legal and licensed marijuana businesses.

DENVER — The Fourth Corner Credit Union in Denver filed a pair of lawsuits Thursday against the Federal Reserve Bank of Kansas City and the National Credit Union Administration after being denied a master account from the Feds and federal share deposit insurance from the administration.

The master account and insurance is needed for the credit union to be the first to serve the banking needs of the fast-growing marijuana industry in Colorado. The master account makes it possible to take credit- and debit-card payments and move money electronically.

The New York Times reported that the Fed’s branch in Kansas City privately…

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