CBD businesses struggle as credit unions, banks close their accounts

By Brandon Anderegg

May 26, 2019

WAUKESHA — The 2018 Farm Bill was the catalyst for the CBD craze across Wisconsin in 2019, but local CBD businesses now face a set of new challenges with some banking institutions closing their accounts.

Beyond Full Spectrum, a CBD business in downtown Waukesha, is now on their second bank account, said Michelle La Count, coowner of Beyond Full Spectrum. After having an account with Summit Credit Union for several months, Beyond Full Spectrum was informed their account would be closed.

In a statement to The Freeman, Summit Credit Union CEO and President Kim Sponem explained their decision to close Full Spectrum’s account and called for more clarity in state and federal financial institution laws before opening accounts for a business selling CBD.

“Summit Credit Union has always championed the small business and entrepreneurs throughout the communities we serve. While the 2018 U.S. Farm Bill legalized the industrial sale of hemp, individual states need to develop some type of certification that will be recognized by our regulators as meeting our regulatory criteria for compliance. To do so without that, financial institutions are under significant risk of being in violation of state and federal financial institution laws.” Beyond Full Spectrum announced Friday they will only accept cash transactions for the foreseeable  future, as credit card processors are also pulling out of the CBD industry, said Aleksandr Gerasyuta, co-owner of Beyond Full Spectrum. The business has applied for another bank account and credit card processor, but it could take more than a month until they find out if their business has been approved, Gerasyuta added.


Regulations

The USDA has not yet issued guidelines on how to regulate hemp or CBD. However, the sale and production of hemp and CBD is allowed in Wisconsin without USDA approval because the state was approved to launch the hemp research pilot program, which would be grandfathered into federal guidelines.

States will be able to operate hemp pilot programs until either the USDA grants states regulatory authority over hemp production or until federal law repeals pilot programs, according to a Wisconsin Legislative Council Act Memo.


Local impact

La Count and Gerasyuta say the banking troubles have been frustrating, especially since they know from a legal standpoint they’re complying with state regulations required to sell CBD.

“We know what we’re doing is completely acceptable and it falls within all of the parameters,” La Count said. “It’s a bit of a pickle, but I think we'll have it all squared away pretty quickly.”

Lake Country CBD owner Brett Klug said his business is also experiencing the same challenges, but as customers come in seeking CBD as a holistic remedy for their ailments, he remains hopeful, he said.

“The more people that share their success stories, the more people that are going to use it,” Klugg said. “The people making the rules are going to end up personally knowing people positively affected by CBD and I think that’s going to help.”


Banks uncertain

A 2018 Wisconsin Bankers Association survey suggests banks have little confidence in hemp businesses.

The two-question survey included 95 Wisconsin bank CEOs and presidents in which 83 percent said they would not actively seek to provide loans to industrial hemp farmers and/or processors in Wisconsin if the Farm Bill changed the federal view of hemp.

Although regulations for credit unions and banks differ, Wisconsin banks are facing similar challenges when servicing businesses in the CBD industry.

Banks must comply with several federal guidelines, some of which are not clear when it comes to bank accounts for CBD businesses, said Scott Birrenkott, assistant legal director for Wisconsin Bankers Association “We’re looking at a situation where the government is going to come into the bank and look at these files, but the banks don’t know what to be prepared for because they haven’t told them,” Birrenkott said.

However, banks are also hesitant to open accounts for CBD or hemp businesses because some banks may be unfamiliar with the industry, Birrenkott said.

“This is very new and a very complex issue,” Birrenkott said. “There might be growers, processors and retailers that understand and know this industry very well, but it’s new to the financial industry.”

But despite the confusion, Birrenkott said there are banks that are interested in learning more about how to serve customers with CBD businesses, and the WBA has been educating members by providing webinars and seminars on CBD and hemp, Birrenkott added.

“Banks really do want to help their customers, but at this point, they’re just asking questions and trying to learn,” Birrenkott said. “Until they have all these answers and the guidelines, they’re going to keep asking their questions.”

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