Federal Reserve Turns Down Credit Unions Over Marijuana, Credit Unions Sue

By McCarton Ackerman 08/06/15

The Federal Reserve has not given a public explanation for refusing the credit union's application.

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State-licensed marijuana businesses in Colorado received a major blow this week after a credit union that wanted to serve this burgeoning industry was turned down by a branch of the Federal Reserve.

The Fourth Corner Credit Union in Denver had applied to the Federal Reserve for a “master account,” which would have allowed them to serve state-licensed pot businesses in Colorado and interact with other financial institutions.

However, the Federal Reserve branch in Kansas City privately informed them last month that their application had not been approved. Although a specific reason was not made in public, the drug’s illegal status at the federal level is the likely cause for the ruling.

In response, the credit union has filed a lawsuit in federal court against the Federal Reserve and demanded “equal access” to the financial system. The credit union also has the public support of Colorado’s governor.

“I felt all along like they were trying to figure out a way to deny our application,” said Mark Mason, who has been leading the credit union’s application, to the New York Times. “[Now], a federal judge who is only concerned in applying the law can make the decision.”

Because of marijuana’s status at the federal level, banks have shut down hundreds of marijuana business accounts across the state due to potential prosecution for aiding and abetting illegal drug dealers. These businesses have been forced to operate entirely with cash and store all of their funds in safes, armored cars, or private vaults. Some have also been forced to hire security guards and deliver money to the State Department of Revenue in buckets to pay their bills.

Because some pot shops in the state clear as much as $500,000 per month, Colorado’s state government has said the problem is now a public safety issue because having that much open money leaves them targets for crime and violence.

"I'm a pro states' rights guy, and in Colorado we have legalized," said Chris Myklebust, the Colorado commissioner of financial services. "When I pull a $20 bill out of my pocket, and look at the front, it says it's legal tender for all debts public and private. Legal businesses in a state should be able to use the currency of the nation."

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McCarton Ackerman is a freelance writer and editor living in Portland, Oregon. He has been a contributor for The Fix since October 2011, writing on a wide range of topics ranging from medical marijuana in Colorado to the world's sexiest drug smugglers. Follow him on Linkedin and Twitter.