On Monday, August 12, Senate Minority Leader Chuck Schumer (D-NY) sent a letter to federal lawmakers strongly advocating for them to provide updated guidance to financial institutions. He sent the letter to financial regulators in order to guarantee that CBD oil companies will no longer struggle to have access to banking services due to strict hemp banking rules.
Even though the federal government legalized hemp and its counterparts under the Agriculture Improvement Act of 2018, hemp banking rules are still causing manufacturers and distributors that sell CBD hemp products to be denied finances necessary to succeed due to the reservation among the financial sector, according to Schumer.
If financial operations aren’t receiving updated guidance clarifying industrial hemp’s legal status, the hemp industry will suffer significantly, Schumer said. Strict hemp banking rules will essentially limit the hemp industry from growing at all. They will also restrict further producing revenue and jobs for our economy.
Schumer is not the first to put pressure on federal financial regulators to be more clear about hemp’s legal status.
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Sen. Michael Bennet (D-CO) sent a similar letter back in June, requesting clarification on hemp banking rules. In fact, the OCC, FCA, FDIC, Federal Reserve and National Credit Union Administration (NCUA) all responded. Each federal financial regulatory agency recognized that the 2018 Farm Bill legalized industrial hemp.
This means that hemp banking rules that control how financial institutions work with hemp businesses have changed.
The five responses, however, all stated different things with regards to what the agencies were planning on, or already, doing to clarify any uncertainty among the financial sector.
According to Bennett, farmers and companies in the hemp industry have experienced hindered growth. This is due to the uncertainty at federal financial institutions regarding hemp banking rules. In turn, this has provoked a lack of access to financial help. Without access to basic financial help, like credit, many hemp companies in the industry are unable to expand their business operations.
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Even more, there remains confusion among banks regarding hemp. The American Bankers Association (ABA) also urged for action last week, sending the financial regulatory agency heads each a letter. The ABA claimed there has been very minor distinctions between legal hemp and federally illegal cannabis. This has left tons of hemp banking rules unclear, creating confusion among banks regarding the legality of hemp.
According to the letter, banks wish to support local businesses. However, they cannot do so without the go-ahead from regulators that hemp is different from cannabis with certainty. The ABA continued to request confirmation that hemp isn’t on the controlled substance list anymore.
Additionally, the lack of regulatory clarity in hemp banking rules has impacted small businesses and hemp industry leaders the most. For instance, in some situations, small time employees haven’t been able to receive private loans because of where they work.
Although there were reforms on hemp banking rules last year, many CBD businesses still are unable to receive financial services. Some services include basic necessary things like credit card processing.
Even more, such businesses still might have trouble just getting a checking account. Also, if they are capable, banks might charge large percentage fees on deposits.
Despite all of this regulatory uncertainty, many CBD entrepreneurs have been able to find banking solutions among small credit unions.
Although there were reforms on hemp banking rules last year, many CBD businesses still are unable to receive financial services. Some services include basic necessary things like credit card processing. Even more, such businesses still might have trouble just getting a checking account. Also, if they are capable, banks might charge large percentage fees on deposits.
Despite all of this regulatory uncertainty, many CBD entrepreneurs have been able to find banking solutions among small credit unions. Some other people and places hemp entrepreneurs turn to for financing include family members, friends, hedge funds, angel investors, and highly wealthy businessmen.
Some online hemp companies, like Future Leaf Organics based in Wisconsin, for instance, have struggled as well. This is because they are unable to open their stores as they struggle to find credit card processors. For now, they accept orders through PayPal and will try e-check processing so they can get their business up and running.
It is truly a difficult challenge for these companies with such pushback from financial institutions. However, these companies consider themselves part of the health and wellness sector rather than part of the cannabis industry.
Some might be surprised to learn that even in states with recreational cannabis use, CBD businesses are hindered by a lack of financial services.
As of late, Congress has added an amendment to the Secure and Fair Enforcement (SAFE) Banking Act. This act is a measure on cannabis-banking that’s pending in the House of Representatives.
It will reinforce the legal status of hemp and confirm the legality of financial institutions providing services to companies selling hemp and hemp-derived products.
The latest efforts by Congress to emphasize hemp’s legal status and clarify hemp banking rules seems to be appreciated by those in the industry. On the other hand, they find the fact that the financial sector continues to delay the process upsetting.
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