Feds reject pot industry’s bank bid

DENVER – A Colorado credit union is hoping a federal judge will intervene to let the booming marijuana industry move its finances from cash-stuffed suitcases to the regulated banking system.

A pair of lawsuits filed in Denver this week challenge recent decisions by the U.S. Federal Reserve and the National Credit Union Administration to deny applications from Fourth Corner Credit Union.

The credit union was set up last year to serve Colorado’s marijuana industry, but it needed permission from federal insurers and regulators before opening for business.

The Federal Reserve rejected Fourth Corner’s application earlier this month.

The decision means many pot businesses still use elaborate banking workarounds – from paying the power bill with money orders to spritzing skunky cash with Febreze to avoid scrutiny.

The U.S. Treasury Department issued guidelines last year for how banks could accept pot money. But many large banks considered the guidelines onerous and still won’t take deposits related to marijuana businesses, prompting Colorado banking regulators to set up a proposed credit union to comply with those guidelines.

Fourth Corner would have allowed pot shops and growers to access not just basic checking but also lines of credit and other financial products the expanding industry wants.

The National Credit Union Administration cited uncertainty about the marijuana business in declining Fourth Corner’s application for deposit insurance. In a July 2 letter, the agency told the credit union that the marijuana industry “does not have an established track record of success and remains illegal at the federal level.”

Two weeks later, the Federal Reserve rejected the credit union’s application for a “master account,” which Fourth Corner would need to interact with other financial institutions.

The credit union filed two lawsuits Thursday challenging the decisions.

“The NCUA lacks expertise in the operation and regulation of the state legalized cannabis industry,” the credit union argued in its complaint.

Representatives of the NCUA and Federal Reserve declined to comment Friday on the lawsuits.

Other federal agencies are starting to talk about the marijuana industry’s finances, though.

The Internal Revenue Service released a memo Friday saying that a Washington marijuana business owner could subtract state excise taxes on pot from the proceeds of selling it. Industry watchers interpreted it as an incremental step toward allowing pot business to claim business deductions currently off-limits to them.