More banking options for cannabis businesses; Similar complaints

This summer, Brattleboro Savings and Loan and Vermont Federal Credit Union entered Vermont’s growing recreational cannabis banking business, bringing the total number of financial institutions in Vermont willing to push through regulatory hurdles to serve the new businesses.

With the first retail stores slated to open Oct. 1, some cannabis business owners — especially small growers — say they’re still looking for services from the state to meet their needs despite the growing number of options. Others say they now move in cash.

Dan Yates, president and CEO of Brattleboro Savings & Loan, said the bank began opening cannabis business accounts in June. Today, the bank serves five businesses and growers, along with one retailer, and another nine to 10 businesses are awaiting approval from the Cannabis Regulatory Board before they can open their accounts.

Vermont Federal Credit Union has been accepting cannabis business accounts since July, said Doug Fisher, the bank’s CEO. As of this week, the credit union has opened accounts for 53 recreational cannabis businesses, he said.

“We’re excited about the opportunities it presents,” Fisher said.

Vermont State Employees Credit Union has the longest experience serving cannabis businesses, with all five medical providers as clients, said Greg Huisman, director of commercial lending. This year, the credit union has opened 80 new accounts for recreational cannabis businesses, he said.

VSECU members are currently voting on a proposed merger with New England Federal Credit Union, the fourth financial institution on the list.

Yates said that if all goes well, Brattleboro Savings and Loan would like to be the go-to institution for cannabis businesses south of Route 4. But now the bank is limiting its cannabis customers to those in Windham County and eastern Bennington County. Where there is a branch in Winhol.

“If it’s too far from that market place, we won’t be banking on it for the time being, but we’ll see,” Yates said. “It’s dipping a toe in the water before jumping in completely.”

Can accommodate more than one bank.

Cannabis remains illegal under federal law, and Vermont’s regulatory environment is new. As a result, Brattleboro S&L estimates it needs one full-time employee to comply with federal regulations for every 15 accounts, according to Yates. Currently, the Brattleboro S&L has one staff member familiar with relevant federal laws, along with a full-time assistant who oversees cannabis accounts.

For VSECU, staffing all the new accounts was also a challenge. The credit union has paused opening new cannabis accounts.

“It was hard to predict how much market share we were going to take right off the bat,” Huisman said. Our success is now more than we can handle, so we need to allocate more resources and aim to re-open our cannabis memberships.

The impact of that decision was felt by growers and retailers across the state.

While Anna and Josh McDuff, owners of Mountain Girl Cannabis, a retail store in Rutland, received the state’s first license for a retail recreational cannabis store, while they were able to get a VSECU account, grower and retailer Scott Sparks was not.

Sparks has been banking with VSECU for two other businesses, but said he was turned down when he applied for an account for his cannabis farm. So he moved to Brattleboro Savings and Loan, where he worked as a retail banker for Canbis.

The effects of integration have been debated.

Merger critic and former VSECU board member Jerry Diamond believes the decision to pause taking on new recreational cannabis accounts was made out of fear that federal regulators would stop the proposed merger.

“To say they’ve stopped taking on any new accounts and that’s because they don’t have enough staff is literally not true,” Diamond says, noting the two years banks and credit unions have to prepare after the Legislature legalizes it. The sale of recreational cannabis.

Huysman strongly disputed that. New England Federal Credit Union said it had some cannabis businesses as a customer, but that concern was not warranted. “And they plan to continue that business and this merger doesn’t change that,” Huisman said. “It will free up more resources to take care of more cannabis businesses.”

Andrew Subi, a Burlington attorney who represents cannabis businesses, is now referring clients to the Vermont Federal Credit Union as well as the Brattleboro Savings and Loan. Because of the pending merger, he said, he is steering customers away from New England Federal Credit Union.

John Dwyer, president and CEO of New England Federal Credit Union, dismissed that concern. Federal regulators have pre-approved the merger and concluded that the credit union can continue to offer cannabis banking services if the merger goes through, he said.

Many banks, fees are still high.

New England Federal Credit Union said Subin was referring customers elsewhere because “fees are too high.”

“We don’t believe our fees are high,” Dwyer said. “These accounts are typically the types of accounts that require regular reporting and we’ve built the pricing to identify the costs that we need to report and the costs associated with that support.” He declined to disclose specific charges.

Brattleboro Savings and Loan charges a variety of monthly fees to manufacturers, producers, retailers, wholesalers, testing facilities, and incorporated licensed businesses. The amount paid also depends on how big the business is, Yates said.

So far, the southern Vermont newcomer appears to be offering the most competitive rates, Subin said.

But the biggest cost factor is the size and complexity of the business structure.

Karen Devereux, a grower in Barton, said she and her husband opened an account at Vermont Federal Credit Union after VSECU turned them down. Devereux and her husband are growing 125 outdoor plants and 1,000 square feet of indoor plants, which puts them in the smallest category of gardeners.

For growers of that size, the credit union charges $100 a month to have an account, Fisher said. But customers with more than one license type will pay that amount multiple times.

Devereux and her husband are pursuing a manufacturing license and a retail license.

“It’s too expensive,” she said. It’s going to cost us $2,000 a month to get a bank account.

Huisman said VSECU charges a variable rate based on the customer’s deposit amount. It is 1.5% deposit for small customers, he said.

Dave Silberman, a Middlebury attorney who represents cannabis businesses, has been steering clients away from VSECU for the past few months because he feels the fee structure is too high.

But for a small cannabis grower in the Georgia town Wyeth Shamp is banking there, it works out to be less than the fixed fees paid by other credit unions and banks.

“For small farmers, it’s better to do it on a percentage basis as opposed to a flat rate,” Champ said.

Alternatives are still popular

Despite the growth of options, some Vermont cannabis businesses are looking outside the state for their banking.

Silberman owns a subsidiary called Lighthouse Biz Solutions, a Massachusetts-based GFA Federal Credit Union that accepts cannabis license applications from Vermont businesses. (GFA said it was unable to schedule an interview for this story.)

Dama, a San Francisco-based financial company, works with Lead Bank, Kansas City-based National Digital Community Bank and other banks to provide services to licensed cannabis businesses. Charles Weiler, Dama’s account executive, said the company has about 20 Vermont clients.

“Their fees are a lot lower than the credit unions here in the state,” said Lauren Andrews, a cannabis user who applied for a retail license in Montpelier, the capital city of Montpelier. “The fixed costs of running a cannabis retail store are extremely high, so wherever you can save money, you have to do that.”

And then there’s money.

One option for small gardeners is not to open a special bank account. Subin, some small growers are choosing not to put money in the bank.

“A lot of growers are saying, ‘I’m not going to pay $1,000 or $1,500 a month in bank fees,'” says Subin. “I’m going to take this cash and put it in my house and use it to buy groceries and clothes for my kids.”