Transgender, Marijuana Markets Fulfill Credit Union Purpose
It’s been 50 years since the Counterculture Revolution took hold in San Francisco, New York and other cities across the world.
You wouldn’t know it from some of the comments we’ve received at CU Times.
Page one of our next print issue features a story about Chicago’s $9 million North Side Community Credit Union, which launched a gender affirming loan. The funds can be used to finance medical surgeries, procedures, voice lessons, a new wardrobe and other expenses, since most transgender individuals lack the financial resources of Caitlyn Jenner.
In fact, the transgender community has a much higher rate of unemployment and low income than the general population, which isn’t a big surprise as discrimination against this group is still strong in most parts of the country. Counterculture literally doesn’t pay.
Because of those factors, the loan is more than just a personal loan plus marketing. Not one applicant has qualified yet due to credit issues, so one feature of the loan package allows entry-level borrowers to qualify for an unsecured $500 loan. Another option allows members to build savings as they improve their credit scores by repaying loans of up to $1,000.
Some readers mocked this loan program and those who would apply. One reader called it cheap publicity and added, “if someone needs a loan for a personal reason, I thought we would just make the loan and not publicize the purpose.”
This reader missed the point of why credit unions exist. If transgender individuals could obtain a personal loan from a bank, they would do so. I’m sure plenty of them have. But, as the article explained, many can’t qualify due to credit issues that stem directly from their transgender identities.
The success of credit unions among mainstream borrowers has spoiled this community. Alternative financial providers like payday lenders thrive because the underbanked and unbanked aren’t welcome in some credit union branches. The snarky, bigoted comments on our website support that claim.
Risk-averse regulators are fueling the fire. Creative ways to serve the underserved, even when risk is covered, is practically forbidden.
The regulatory climate has changed from one in which regulators were still regulators, but also partners, understanding their role in helping credit unions serve consumers. These days, the regulatory climate is downright combative.
“When you make a business decision, the most important thing isn’t whether it’s best for members, it’s ‘what will my examiner think?’,” a credit union CEO told me yesterday.
I know many of you are nodding your heads in agreement to that one.
Speaking of regulatory contraband and risk management, credit unions interested in serving the growing legal marijuana market should purchase Sundie Seefried’s new book, Navigating Safe Harbor: Cannabis Banking in a Time of Uncertainty. Seefried is president/CEO of the $311 million Partner Colorado Credit Union, located near Denver.
Her book details how she established a division of the credit union, Safe Harbor Private Banking, to serve Colorado’s thriving marijuana industry.
It’s a detailed guidebook on how to manage regulatory, reputational and physical risk associated with this market, and also clarifies for regulators how to help financial institutions bring stability to the rapidly growing industry.
Most are familiar with the conundrum faced by financial services providers in states where medicinal or recreational marijuana is legal. Federal laws make it so difficult for cannabis businesses to open checking or savings accounts in federally insured financial institutions, most of them don’t even want to try. That means state-legal marijuana businesses are unable to wire funds, access lines of credit or maintain payroll accounts, and must pay bills, employees, suppliers and taxes in cash.
That’s not just risky for those in the industry; it’s risky for everyone. Marijuana business owners frequently visit supermarkets, convenience stores and other money order providers with backpacks filled with $10,000 or more in cash. They wouldn’t be the only ones harmed in an armed robbery. Everyone else in the store could be, too. This public safety issue was one of the reasons Partner Colorado’s board approved the service.
Whenever we publish a story about credit unions serving the marijuana industry, we receive comments from readers who react as if it’s 1936 and they just watched Reefer Madness.
Those who oppose legal marijuana, like those who discriminate against the transgender community, are on the wrong side of history. Earlier this month, an anonymous DEA lawyer said the agency planned to reclassify marijuana as a Schedule II prescription-only drug sometime this summer. More recent DEA reports said the agency doesn’t have a timeframe for the move, but admitted it’s considering it. The move would give states more leeway to govern medicinal and recreational use.
Nobody should lay around on the sofa all day smoking weed, just like nobody should do the same while drinking vodka. But alcohol is legal, and credit unions serve liquor stores, breweries and other segments of that industry. Ask any police officer, and they’ll tell you alcohol causes far more problems in our society than marijuana does. Prescription drugs cause plenty of problems, too. Heck, just watch reruns of Cops if you doubt that.
Seefried’s program isn’t soft on serving the marijuana industry. She described the credit union’s policies and procedures as draconian. Potential members are presumed to be laundering money and using the storefront for illegal purposes until they can prove otherwise. Every single transaction is scrutinized. Seefried said that heavy hand has turned away some, but that was the point.
“We wanted to weed out those that might be intimidated by our rules and methods and retain only those willing to be 100% transparent,” she said.
Another reason to consider serving this industry? Your credit union probably already does and you don’t even realize it. Seefried said many marijuana businesses deposited bank and credit union checks to open their accounts. Most of the accounts were personal ones functioning as business accounts. Others had misleading business names that hid the nature of the business.
Serving legal marijuana retailers is also profitable, because the mismatch between demand and supply allows credit unions to set their own fee schedule without much competition.
Seefried said the business could be as profitable as a credit union wants to make it.
“We have priced it as the low cost provider in the state, but we make what we consider a good enough profit to retain the relationship long term, and not just a short term profit, that would later look like we were not representing the credit union philosophy properly,” she said.
Navigating Safe Harbor: Cannabis Banking in a Time of Uncertainty can be purchased and downloaded at safeharborprivatebanking.com and is available at Amazon.com in both ebook and print versions.
Heather Anderson is executive editor of CU Times. She can be reached at firstname.lastname@example.org.