OBEE Credit Union of Olympia Washington currently serves twenty cannabis-related businesses and has more in queue. James talks about why they decided to help their members that own cannabis businesses. James also reveals a very clever way that dispensaries can avoid using so much cash.
[1:13] – Background of OBEE.
[2:55] – James explains the decision for OBEE to serve the cannabis industry.
[4:25] – How are members reacting to supporting the cannabis industry?
[5:51] – James explains how deposits are made.
[9:28] – Are LLCs in Washington that operate in another state eligible for banking?
[10:10] – Limitations on money transactions.
[13:03] – James discusses the Dodd Frank Act.
[15:01] – Contact details for OBEE Credit Union.
Matthew: Hi, I’m Matthew Kind. Every Monday and Wednesday look for a fresh episode where I’ll take you behind the scenes and interview the leaders of the rapidly evolving cannabis industry. Learn more at www.cannainsider.com. That’s www.cannainsider.com. Do you know that feeling when you sense opportunity, when you see something before most people and you just know it will be successful, then you're ready. Ready for CannaInsider Consulting. Learn more at www.canninsider.com/consulting. Now here's your program.
I am pleased to welcome to the show James Collins, CEO of O Bee Credit Union in Washington State. OB’s board of directors approved a plan in September 2014 to open business relationships with cannabis producers, processors and retailers. Welcome to CannaInsider James.
Matthew: First kudos to you and your board for approving the measure to allow banking to licensed cannabis businesses. History is on your side, and I hope you get a lot of new business from this. Can you give us a little background on O Bee’s decision to do this?
James: Yes, first off a little bit of a background on the credit union. Founded in 1955 from the employees of the Olympia Brewery or it was named at the time The Olympia Beer Company. That give us our name. The Brewery declined, but we’ve adjusted our membership to be statewide, but we’re primarily still based upon Western Washington. We started on this business because over the years we have had a lot of members that had a lot of businesses. And we had a member who had a business that came in and he had a new 502 business, and yes the simple question of if you supported my last business, why won’t you support this new business.
Matthew: Good question. Now do you serve clients only in the Olympia, Washington area or anywhere else?
James: We serve members throughout the State of Washington as long as they live or work here, and we serve I 502 businesses throughout the state though we do have some limitations on retailers.
Matthew: Okay. Now can you tell us about the board’s decision to start working with licensed cannabis businesses in Washington State. I know that it’s kind of a tricky thing for you because you’re kind of moving on the bow wave here. In a couple of years this will look totally safe and normal and nobody will even be talking about it. But as a first mover there might me some trepidation or a concern about doing this. Can you tell us how you grappled with the decision and how you ultimately decided for it?
James: Well when it first passed we left it up to others to deal with I 502 businesses, but after a time it was evident that that wasn’t going to happen. And we had the one member come to us and ask for an account specifically. And the board grappled with the decision on a couple of areas, and in the end we ended up with three reasons why we would go ahead with it. The first was from the community, we thought it would enhance public safety. I mean drugs and cash in the community is a recipe for trouble. And the second reason is that is it’s not our goal or our desire to ever tell members what they can and cannot do. So we have a lot of members that own other businesses that might be questionable. We don’t question them. So we’re going to support our membership. And then the last reason there is that credit unions were formed many many years ago because people couldn’t get bank accounts. That’s why the entire industry started and this kind of seems a very familiar subject. These people can’t get bank accounts.
Matthew: Right, right. History repeating over and over. Now has the membership been divided on this subject as far as welcoming cannabis related businesses or what’s the response been?
James: After we had an initial feel phase where we just kind of opened a few accounts, saw how they acted so we could communicate with our membership what it was we were doing, and also making sure we were doing what we needed to do, and we could do it. And then we announced it in our internal newsletter which went out to membership. And then that response was only positive, and then we were featured in an Olympian article, and that response was only positive. So again our roots are from an industry that had had its share of people that didn’t like it. And so, you know, it was really never an issue for us.
Matthew: And do you have a tally on how many cannabis related businesses have open accounts?
James: We have more than 20 right now that are actively with us, and I think we have about another 10 in the queue waiting to join.
Matthew: Now is there any kind of creative ways to deposit cash or do this electronically? I mean how are your members that have cannabis businesses, how do they make deposits? Is it different than any other client or member?
James: We’ve been pushing our retail clients especially to have an electronic way to deal with cash.
The leader that I’ve seen so far is Cannatransact which puts basically a cashless ATM in the retailer and charges a small fee, but what it does is it eliminates cash. The retailer doesn’t have to take cash and they get credited in their account here the next business day or two business days, whatever Cannatransact does. So we had expected a large influx of cash, and we’ve not really seen a large influx of cash. A second piece is once you have retailers, growers and processors all banking with us they can exchange checks and everything else just like a normal business. So the cash basically drives itself out of the system.
Matthew: That’s a pretty clever way of doing things. As long as a cannabis business is properly licensed, can they become a customer or is there any other… or a member? Is there any hurdles apart from that?
James: They could be eligible. We have a couple of limitations. One is we are responsible for looking through their application, even if they have been approved by the LCB and making our own judgments. And there’s been a couple where we’ve not, we found something that we didn’t like and we refused. A second thing is that we want to make sure that retailers don’t violate federal law by having marijuana cross the borders. So currently we’re not supporting any retailer that is in a county bordering either state or other country. That’s our only limitations at this point. But everybody else is fine; growers, processors, labs. We don’t have any issues. We do not serve anybody in the medical side because that’s a non-regulated business.
Matthew: Okay. The Omnibus or some people call it the Cromnybus spending bill that passed in December of 2014 and it was signed into law defunds the DEA and the Department of Justice from prosecuting cannabis related businesses that are complying with their own state laws. Does this make you feel more confident about the direction things are turning for the banking sector and credit unions helping cannabis members?
James: To be honest, no. That is an interesting way that they did that, but I’m hoping that our politicians can get together and pass legislation which says it’s either legal or it’s totally illegal and really be definitive. These things that are either executive orders or funding things they can change in a moment. So, you know, we do not like that risk of not knowing what’s going to happen tomorrow.
Matthew: If a business opens an LLC in Washington, does that make them eligible for a banking relationship even if they might have the bulk of their operations in California or Colorado?
James: We are relying on the liquor control board’s, licensing and a lot of their over watch on these businesses. So if we cannot rely on that because maybe they’re doing business in California, we could not serve them.
Matthew: Okay. Now is there any limits to the… you mentioned some of the creative things with the cashless ATM, but you were saying before that processors and so forth can send payments back and forth so they have the full spectrum of services you offer that can do a wire transfer, electronic bill pay, pretty much anything any other business member can do.
James: They can. The one limitation that we do have on them is they cannot use what is called shared branching. Most credit unions are on shared branching. So you could go into any credit union and make a deposit, pay a loan to any other credit union. Because those other credit unions haven’t agreed to handle I 502 accounts, we do not allow our members to use that service, but they can use normal online banking, our ATMs that we own, and they can use their debit cards of course at any ATM, ACH. We do not offer any lending to them, that’s another limitation.
Matthew: Okay, now as you mentioned you had around roughly 20 members that are in the cannabis industry. Have you noticed any particular needs they have that make you think about hey, maybe we should create this service just for cannabis members because we see a certain need over and over again? Is there any peculiar things you notice about the cannabis businesses that you could do to help them?
James: For us, no. I mean what we’re just trying to do is provide basic services so they can deposit money, they can get out money, they can write checks, they can run their payroll. They can pay their taxes. They get to save on, you know, if you pay your taxes in cash there’s a surcharge on that. So we’re doing all those basic things. I think one thing that’s outside of what we can do that is really needed for that industry to really take off is for some processor to step up and allow them to use debit cards at their branches outside of that Cannatransact type of methods.
Matthew: Now this is really unrelated to the cannabis industry, but it was in the fore mentioned Omnibus spending bill where provisions of the Dodd Frank Act that would prevent banks from using FDIC insured funds for trading operations. That part was repealed so banks, many commercial banks are now using depositors’ funds for trading or other services or activities besides making loans. I know credit unions are different, but how do you feel about that in general?
James: About being able to use basically big bets with your customers’ money?
James: Well that’s not something that I think the credit union movement was all about. We’re kind of, if you look at the credit unions in general, we’re a little bit of the Miracle on 42nd Street type bank. It’s the local members, local people in the community actually own the credit union. They are the members, and they put their deposits in here and they allow other people that they know to take it out as a loan. That’s the only thing that we do. It’s simple. You don’t get in problems. Credit unions never got in problems in a financial meltdown. It’s just a lot more stable and a lot cleaner way to do it.
Matthew: Yeah, I agree. And you know I think a lot of people are with the giant monster megabanks because there’s one on every corner and there’s a perception well if I want to get cash, there it is. But as we move more and more to a cashless society do you think that credit unions will experience, you know, will experience more turnover? They’ll get more customers that are leaving these big giant monster mega banks?
James: I can’t say for the industry, but I can say from our standpoint prior to the economic recession our average growth rate was maybe two to three percent. In the last three years we’ve averaged about eleven.
Matthew: That’s great.
James: It’s obvious that there has been a change in the public’s mind anyways. In particular Washington State has a very strong credit union movement. And we are kind of a much higher percentage of people that use credit unions than the rest of the nation.
Matthew: Okay, great. Well James as we close how can listeners find out more about O Bee Credit Union?
James: Well I would first have them go to our website which is www.obee.com, it’s Olympia Brew, Olympia Beer. But if you’re in the I 502 industry, I would just have them call us and our 800 number is 800-642-4014, and let the representative know that you have an interest in our I 502 offerings, and one of our specialists that only deal with that will get back with you.
Matthew: Awesome. Well I really encourage listeners to not only open an account with O Bee, but wherever you are in the country to please look at credit unions. It helps to circulate money locally instead of having it siphoned back to Wall Street for other activities, and there’s really just no downside anymore to being with a credit union because, you know, all the services that James just mentioned are available at your local credit union. So thanks again James for being on CannaInsider. We really appreciate it.
If you enjoyed the show today, please consider leaving us a review on iTunes. Every five star review helps us to bring the best guests to you. Learn more at www.cannainsider.com/itunes. What are the five disruptive trends that will shape the cannabis industry in the next five years? Find out with your free report at www.cannainsider.com/trends. That's www.cannainsider.com/trends. Have a suggestion for an awesome guest on www.cannainsider.com, email us email@example.com. We would love to hear from you.