Going to the cannabis dispensary in the U.S. typically means a stop at the ATM first, since plastic won’t work to get your medical or adult-use products. Recently, a large, multi-state cannabis company decided to solve this problem for themselves and launched their own credit card.
Columbia Care is a medical cannabis business that has locations in nine continental states, Puerto Rico and the District of Columbia, and they are no stranger to the strain that a cash-only model has put on the cannabis industry. Even the IRS struggles to cope with the millions of dollars in cannabis cash they receive from cannabis businesses across the country.
Blocked from working with most financial institutions due to federal prohibition, Columbia Care’s new credit card is intended to help patients pay for their medical needs when they need it. The credit card works like any other store credit card does: you can only use it at their stores, there is an average interest rate of 15% (depending on a customer’s credit), and you need to pay it off every month to keep using it.
While the credit card is a good solution for now, these kinds of measures would not be necessary if federal regulators clarified the rules for banks and insurance companies. Financial institutions want to service the cannabis industry, but they are regulated at the federal level. And federal regulations do not make clear room for working with cannabis businesses, even if they are licensed and regulated by their respective states. The current guidelines that banks that do try to work with cannabis companies are required to follow include filing several Suspicious Activity Reports and watching the accounts closely, and that is no guarantee that a federal crackdown won’t happen.
That is why big companies like Visa and Mastercard have declined cannabis companies as clients, enforcing the cash-only policy (though some dispensaries can take debit cards as well). It will take an act of Congress to make these changes, but it isn’t clear if it will happen this year. The Secure and Fair Enforcement (SAFE) Banking Act would pave the way for the financial industry to work with cannabis-related companies, and it has passed the House of Representatives. The Senate Finance Committee has it now.
Even with federal threats looming, more banks are beginning to open their doors to cannabis every year. That trend slowed slightly in 2019, perhaps due in part to speculation that the SAFE Banking Act may pass so they would only need to wait a little longer. Previously, there had been consistent increases in the number of banks and credit unions working with cannabis-related companies.
The Senate Committee Chairman of the Senate Finance Committee had laid out his laundry list of ideas for the bill, and cannabis industry advocates were not pleased with all of them. But the cannabis industry isn’t just sitting back and watching what happens. Cannabis industry lobbying has hit an all-time high as this major issue is the furthest it has ever come to seeing real change at the federal level.
With uncertain future for cannabis banking, Columbia Care has found a workable interim solution.
What do you think? Would you get a dispensary credit card? Let us know in the comments.