Colorado Credit Union Sues Federal Reserve Bank
The Fourth Corner Credit Union asked a Colorado federal judge last month to force the Federal Reserve Bank of Kansas City to issue a master account that would enable the Denver-based state chartered credit union to serve social groups that support legalizing marijuana.
The credit union’s civil complaint filed Sept. 29 in U.S. District Court in Denver argues federal law “unambiguously creates a non-discretionary statutory obligation” that requires FRB-KC issue a master account to all depository institutions. The lawsuit alleged that FRB-KC has “invoked an illegal discriminatory procedure” by requesting information from the credit union that the FRB-KC is not entitled to receive from any depository institution that applies for a master account. The credit union is asking a federal judge in Denver to render a declaratory judgment and grant a mandatory injunction that would order the federal reserve bank to immediately issue the master account.
TFCCU initially applied for a master account with FRB-KC in November 2014 after it received a state charter to serve the legalized recreational marijuana industry in Colorado. However, the credit union has since changed its business plan to serve social groups supporting the legalization of marijuana. The credit union also said it would not serve marijuana-related businesses in the state until there is a change in federal law that would authorize financial institutions to serve the pot industry.
In July 2015, FRB-KC denied TFCCU’s request for a master account, claiming it had unfettered discretion to determine which depository institutions received master accounts. The credit union sued the federal reserve bank, but its lawsuit was dismissed in January 2016. U.S. District Judge R. Brooke Jackson in Denver said that while the credit union was unambiguously entitled to a master account, he ruled the credit union might use the master account in the future to serve Colorado’s state-licensed marijuana related businesses, which would violate federal law.
However, last June the U.S. Court of Appeals for the Tenth Circuit in Denver voided the district’s court ruling, which allowed the credit union to renew its application for a master account.
In August, however, TFCCU President/CEO Deirdra O’Gorman received a letter from FRB-KC that the credit union’s unique nature, structure and history of its business raised legal and policy issues related to the master account request. The letter requested additional information from the credit union.
“All of the said requests deviated from the existing standard procedure to obtain a master account,” the credit union’s lawsuit argued. “FRB-KC continues to maintain its incorrect legal position that it has discretion to determine which depository institutions are entitled to a master account, notwithstanding the law of the case that properly rejected this argument.”
On Sept. 12, TFCCU requested that FRB-KC issue a master account. The credit union also submitted to FRB-KC a resolution approved by the board of directors that stated the credit union “shall not serve marijuana-related businesses until there is a change in federal law that authorized financial institutions to serve marijuana-related businesses.”
Nevertheless, on Sept. 27, the credit union received a letter from Tara L. Humston, vice president of FRB-KC, which stated the federal reserve bank has not denied the credit union’s request for a master account though it is committed to working with TFCCU to adjudicate the request.
“FRB-KC has no discretion to adjudicate TFCCU’s request,” the credit union said in its lawsuit. “TFCCU’s entitlement to a master account was adjudicated by the district court and the 10th Circuit Court of Appeals both of which determined TFCCU was unambiguously entitled to a master account.”
When contacted on Thursday, FRB-KC declined to comment on the credit union’s lawsuit.