COLORADO—If NCUA turns down The Fourth Corner CU’s request for share insurance coverage, the world’s first credit union for the marijuana industry may turn to private insurance.
The CU applied for NCUSIF coverage earlier this year. On Oct. 30, NCUA told The Fourth Corner it could take as long as two years for the agency to make a decision on providing insurance coverage. But an obscure state law allows a CU to open its doors while awaiting approval of federal insurance (http://www.cutoday.info/Fresh-Today/Pot-CU-Key-To-Colorado-Social-Experiment). The credit union hopes to open for business Jan. 1.
By rule, Colorado-chartered credit unions must have deposit insurance from the National Credit Union Administration—but it's a requirement that can be waived by the state's financial services commissioner, the Denver Post reported, noting the CU could ask the Colorado Financial Services commissioner to reverse the 11-year-old rule that prevents state-chartered credit unions from obtaining the same coverage privately.
The credit union could point to the same Colorado law it used to obtain its state charter, one that also says credit unions must apply for NCUA coverage "or comparable insurance approved by the commissioner."
"It would be an issue of a credit union providing a critical public service, of serving an underserved, or in this case unserved, sector," Mark Mason told the Denver Post. Mason, an attorney at The Mason Law Firm in Mt. Pleasant, S.C., is among a team of attorneys assisting Fourth Corner organizers.
Financial Services Commissioner Chris Myklebust, who gave Fourth Corner its charter last month, after learning NCUA could take up to two years to decide whether to insure the credit union, said he understood the process could loop back around to him.
"The commissioner does have the discretion to decide what is comparable insurance to that offered by NCUA," Myklebust told the newspaper. "Whomever is commissioner, should that question come to this office, would have the authority to reaffirm or repeal that policy."
In order for Colorado’s social experiment with legal marijuana to succeed it needs the tools for success – the most important of which is access to banking, Mason told CUToday.info. Mason said that The Fourth Corner will offer basic deposit and payment services. The credit union will not loan CU funds prior to obtaining insurance coverage on its deposits. Income at first from will come from investments and “fair and reasonable” fees charged for services—transaction fees and fees to cover payment validation and compliance reporting to the federal government.
Mason said he believes Visa, MasterCard, American Express will still view the cannabis industry as too risky to serve.