LAS VEGAS BUSINESS PRESS: Marijuana credit union pushes ahead

The question many medical marijuana business owners find challenging to answer is how are they going to pay their bills, employees, and even taxes without access to a bank or credit union account?

We’ve all read stories of dispensary owners walking into City Hall with $50,000 in cash to pay their business license fees or paying a power bill and rent with money orders purchased at a local convenience store.

But as medical and recreational marijuana business exploded in Colorado, Chris Nevitt and others believed they had an answer with Denver-based Fourth Corner Credit Union. Fourth Corner would have allowed dispensary owners and growers to access basic checking, along with lines of credit and other financial products.

The credit union asked for but never received permission from federal insurers and regulators to open. Fourth Corner is suing the Federal Reserve Bank of Kansas City and the National Credit Union Administration for denying its applications.

Although medical and recreational marijuana is legal in Colorado, it is still illegal on the federal level. That distinction has discouraged most banks and credit unions from working with marijuana businesses.

Fourth Corner’s failure is not deterring the efforts of the so-called gang of seven to get Battle Born Credit Union open in Nevada. Randi Thompson, a lobbyist and owner of Randi Thompson Consulting in Reno, told the Las Vegas Business Press she was disappointed, but Fourth Corner’s failure would not affect Battle Born’s efforts to form a credit union.

“We’ve had a couple of pre-application meetings with the Financial Institutions Division,” Thompson said. “We are still working on our application. Our focus from the ground up has been on creating a rigorous compliance strategy.”

Thompson said work on creating Battle Born Credit Union began two years ago. She said Fourth Corner struggled because Colorado doesn’t allow a private insurer option for financial institutions. Battle Born is preparing to file its applications with the Nevada Financial Institutions Division and American Share Insurance, a private depository insurance company, by early next month.

Thompson is hopeful Battle Born will open by the end of the year.

She said the credit union will “be headquartered in Las Vegas, because that’s where most of the businesses are located.” But, Battle Born will have a branch in Northern Nevada.

In a lengthy email to medical marijuana establishments in Nevada, Steve Trollope, business manager for BBCU LLC, set out the differences between Fourth Corner and Battle Born “primarily to dispel any concerns.”

Trollope said Fourth Corner was always going to have difficulty being approved by the National Credit Union Administration.

“Without depository insurance, the Federal Reserve Bank will not approve any application from a financial institution seeking access to the (Fed) system,” Trollope said.

He said other factors contributed to the demise of Fourth Corner’s application including not fully developing its compliance plans to deal with anti-money laundering laws.

Under Treasury Department guidelines from last year, financial institutions must file suspicious activity reports when a marijuana business opens or closes an account.

That report lists three classifications of concern: “limited,” “priority,” and “termination.” But the Treasury Department’s guidance left unclear whether it was legal to do business with dispensaries or growers.

According to Trollope, Battle Born’s strategy includes finalizing a workable compliance plan and software, and not approaching the Federal Reserve for a master account until the credit union has received both its state charter and private insurance proposals.

A master account gives a credit union or bank access to the Fed’s payment facilities, including its check clearing, wire transfer and Automated Clearing House facilities.

“We believe that our strategy strengthens the application process and increases the probability our applications for our state charter, private insurance and (Federal Reserve) master account will be approved,” Trollope said.

Trollope says there are “no guarantees we’ll get approved by federal regulators.” He believes the business plan “provides a lot more credibility when we approach the Fed.”

Battle Born’s business plan also includes Trollope, Thompson and others walking away once the credit union is established.

“We will have nothing to do with the operation,” Thompson said. “We’ll set up the compliance and stand up the credit union and then walk away.”

Thompson said the board of the nonprofit credit union will be made up of people who make their living from marijuana businesses statewide.

She also expressed her confidence that a Nevada-based credit union would be the first financial institution to gain federal approval to open for business.

“Where else but Nevada?” Thompson said. “We made gambling and prostitution legal. We are good at making the illegal legal.”

Meanwhile, Fourth Corner is hoping a federal judge will intervene, forcing regulators to approve the credit union. A pair of lawsuits filed this month in federal court in Denver challenge recent decisions by the National Credit Union Administration and Federal Reserve to deny their applications.

The credit union, which has the backing of Colorado’s governor, was set up to serve the state’s marijuana business but needed permission from federal insurers and regulators before opening its doors. The Federal Reserve rejected Fourth Corner’s application last month.

“We filed our suits as a regrettable last resort,” Nevitt, chairman of Fourth Corner, said in a statement. “Our mission … is to set a new bar for transparency with every regulator and regulatory process.”

Nevitt said Colorado’s Financial Services Division approved their charter, so “we are just looking for a similarly fair hearing” from the National Credit Union Administration and the Federal Reserve.

For now, Fourth Corner’s future is tangled up in lawsuits in federal court, while Battle Born completes its state and private depository insurance applications.

Neither Thompson or Trollope would discuss what comes next should Battle Born’s application for a master account be denied by the Federal Reserve

Maybe reflecting growing public support for medical marijuana, the Senate Appropriations Committee narrowly approved opening up banking services to state legal marijuana businesses. Senate Bill 1726 would prohibit the federal government from penalizing banks that work with marijuana businesses and protect them from prosecution.

“It’s encouraging to see members of the Senate stepping up and joining the House to address the banking crisis facing our industry,” said Aaron Smith, executive director of the National Cannabis Industry Association.

Smith said access to basic banking services is one of the most crucial challenges facing legal marijuana businesses. The bill is being supported by a bipartisan group of senators from Oregon, Washington and Colorado, all states with legalized medical and recreational marijuana industries.

Those senators that signed on to the bill are Jeff Merkley, D-Ore.; Ron Wyden, D-Ore.; Cory Gardner, R-Colo.; Michael Bennet, D-Colo., and Patty Murphy, D-Wash.

A similar amendment was passed by the House last year, but was stripped out during the final Senate budget negotiations. The House has not yet debated the Marijuana Businesses Access to Banking Act of 2015.


Las Vegas Business Press – Small loans led to growing business

LAS VEGAS BUISNESS PRESS: Overdraft fees ‘inhumane,’ Green Dot founder says

Steve Streit, founder and chief executive of Green Dot Corp., is viewed by some in the financial services industry as a pioneer, building one of the nation’s largest bank holding and reloadable debit card companies.

Others view Streit, who drew up the business plan in his bedroom office in San Marino, Calif., as a passionate advocate for the unbanked and underserved communities nationwide, including Las Vegas.

“We are designed to serve the masses, many who may not make enough money to use traditional banks or credit unions,” Streit said during an interview with Oliver Wyman, a partner and co-head of the retail and banking practice at Oliver Wyman at PayThink 2015.

PayThink 2015 was held Sept. 28-Sept. 30 at The Cosmopolitan of Las Vegas. The convention included a number of panel discussions and interviews with financial services executives about the future of consumer payments, including mobile payments and prepaid.

Streit said many in the financial services industry may not realize that Green Dot is a publically traded company with five million active customers, who reload their cards 30 to 40 million times annually. He said Green Dot handles about $20 billion in deposits annually nationwide.

He said Green Dot is not alone in the prepaid card space, noting that NetSpend and American Express compete with his company.

“American Express is our largest competitor,” Streit said. “They’ve been a vicious competitor, but we have survived. We do have a niche and a brand name that means something to consumers.”

He added that American Express is not available in a lot of places, especially in low and moderate income areas. But Green Dot has remained in a good position to compete, especially after signing a new five-year agreement with Walmart.

Green Dot has worked with Walmart since 2007 when it launched the MoneyCard program. Last year, Green Dot and Walmart announced Go Bank, a mobile-first checking account that aims to serve those who are underbanked.

According to the Federal Deposit Insurance Corp., as of 2013, 9.6 million American households were unbanked. The FDIC reported that another 24.8 million were underbanked, meaning they had a bank account but also used services outside the banking system.

In Nevada, 7.9 percent of the population is unbanked, while 24.7 percent are classified as underbanked. According to the U.S. Census Bureau, Nevada’s population estimate as of Sept. 30 was 2.839 million residents.

Streit said Green Dot doesn’t charge overdraft fees. Green Dot’s fee structure, which includes a $5.95 monthly fee without a waiver and a $4.95 reload fee in stores, among others, has not changed since 2009, he said.

He said leaving fees where they are was simply about “not angering your customers,” many of whom make between $9 and $10 an hour and don’t meet the minimum requirements to open an account at their local bank or credit union.

But as Green Dot and other prepaid companies look to expand their businesses by offering non-traditional products, the Consumer Financial Protection Bureau has proposed changes that will impact how these companies conduct themselves.

The proposed rules would demand greater transparency and tighter regulation of the prepaid card industry. The bureau wants more transparency in the information provided to consumers about how the products work and what fees are involved.

Federal regulators also want to limit how much customers can be charged for various features and transactions. In addition, any prepaid account that allows customers to overdraft or overdraw would be required under the Federal Reserve’s Regulation Z to be treated like a credit product.

The Consumer Financial Protection Bureau’s 900-pages of proposals to regulate the prepaid industry has drawn push back from a trade group that represents the industry.

In a letter submitted to the bureau, the Network Branded Prepaid Card Association urged regulators “to show restraint … and avoid imposing overly broad restrictions on prepaid accounts, which could ultimately have the effect of limiting access to popular features and functionality and potentially eliminate entire categories of prepaid cards from the market.”

When asked about the proposed prepaid rules, Streit said “Green Dot supports the CFPB pre-paid rules.” He added that many users of his company’s products earn just over minimum wage so hitting them with an overdraft fee of $20 is “punitive.”

Streit went so far as describing overdraft fees as “inhumane and cruel.”

“We don’t know when the rules will become law,” Streit told almost 300 attendees at PayThink 2015. “But overdraft fees hurt the product long-term.”

Streit said it’s “pretty hard to argue against these things,” including transparency in the information provided to consumers He then reiterated his company’s support of the bureau.

He said Green Dot was always looking for more business opportunities. Streit said the company is looking at offering credit products “on a nationwide basis.”

“We offer a savings account product,” he said. “But it’s not used for long-term savings. It’s more of an electronic cookie jar … it’s there to use it.’

When it comes to saving money, Streit said his customers “are not lazy, they don’t have the money.” He said the banking system makes money off the haves, but the have-nots are growing.

“We have a mission,” he said. “We are a public company, but it’s a good business. We are not a charity. We do think it’s a great business opportunity to offer products to (customers) that are not particularly well served” by the traditional financial services industry.

LAS VEGAS BUSINESS PRESS: Banking Insider – Credit card changeover is both expensive, slow

Credit card swiping at checkout is slowly being phased out in Southern Nevada.

As part of a dramatic shift in how consumers pay for their purchases, local community banks have been issuing new credit and debit cards aimed at reducing fraud.

Valley Bank of Nevada has already issued new EMV — or Europay, MasterCard and Visa — credit cards to most of their clients and now are in the process of testing their new debit cards. The new EMV cards are embedded with a microchip to secure point-of-sale transactions by producing a single-use code.

H. Scott Johnson, Valley Bank’s CFO, told the Las Vegas Business Press the cards cost on average about $3 each, which is more than double the old magnetic striped plastic credit card. He said Valley Bank controlled its costs by participating in a pilot program with its card issuer.

“We were affected by fraudulent transactions,” Johnson said. “Any fraud is difficult for both the bank and our customers.”

Johnson declined to discuss how Valley Bank was impacted by specific data breaches, including those affecting Target and Lowes customers.

Johnson expected the bank to be “100 percent EMV compliant by the second quarter of 2016.” But, he said, the bank is finding there are few retailers in Southern Nevada who have turned on their terminals or have even installed the EMV card readers. So far, about 40 percent of the transactions with Valley Bank credit cards are using EMV, Johnson said.

He added there was still some employee training to do in the retail industry, while customers need to understand the transaction takes a few seconds longer to process than a magnetic strip transaction.

Johnson said Valley Bank hasn’t received any negative comments about the ongoing changeover to EMV chip credit and debit cards. He said Valley Bank expects a “25 percent to 35 percent decline in our total losses” due to credit and debit card fraud.

Henderson branch a win

James York, president of Valley Bank, says the bank’s move to open a second location in Henderson is paying off with $5 million in loans and $1 million in deposits since opening on July 1. Valley Bank’s only full branch is in North Las Vegas.

“So far it looks like a good market,” York said of Henderson. “We are not a full branch. We are just a loan office that needs to have $10 million to $15 million in the books before we can open a full branch.”

York said if the branch can sustain its growth for a “couple of more quarters, then we’ll be in good shape to open a full branch next year.”

York, who had been working on finding and then opening a second location for three years, said it took $2 million from about a dozen investors before Valley Bank opened its Henderson office.

“That’s going to mean long-term success,” the veteran banker said. “I think we’ve done it right. The community has been patient as we have come through this recovery.”

Wells Fargo top SBA lender

For small businesses in Southern Nevada, it’s a good time to borrow money, at least if those loans come with the federal government’s backing.

The volume of Small Business Administration (7a) lending by banks in the region was just short of $200 million during the fiscal year that ended Sept. 30, according to data from the SBA’s Nevada district office.

Sixty banks and credit unions made 553 SBA 7 (a) loans for $190 million in the Nevada district. Wells Fargo was the top SBA lender in Nevada, followed by U.S. Bank, JP Morgan Chase, Meadows Bank and Nevada State Bank.

Wells Fargo, who was the nationwide leader in SBA loans for the fiscal year, issued 136 loans with a value of $35.1 million. But second on the list in terms of loan volume was Las Vegas-based Meadows Bank, with $26.5 million on 29 loans.

“It’s really a tool for us to help meet the needs of companies that are in transition,” said Calvin Regan, senior vice president and SBA division manager with Meadows Bank. “We focus on startups to companies that are 5 years old.”

Regan said these loans help grow the bank’s core deposits and provides an opportunity to convert the borrowers into Meadows Bank customers. He said the biggest request for startup loans is for franchisees, especially for people who have left the corporate world or veterans — all people with “great management skills.”

Meadows Bank operates branches in Las Vegas, Pahrump, Henderson and Reno. The bank, with assets of $484.5 million, also operates SBA loan offices in Nevada and five other states.

Amodei supports Ex-Im

Authorization for the Export-Import Bank expired on June 30, leaving the federal agency in limbo as it continues to service loans made to companies doing business overseas. The 81-year-old federal agency also supported businesses with loan guarantees and insurance.

Opponents, including Rep. Joe Heck, R-Nev., say reauthorizing Ex-Im is just continuing a program that is nothing more than corporate welfare. They also argue that the bank does what private investors should be doing.

But Rep. Mark Amodei, R-Nev., has come out in support of reauthorizing the Export-Import Bank, and has joined a bipartisan coalition to force a vote on the House floor. As of the Business Press’ deadline, no vote had been scheduled.

Amodei said when the bank’s reauthorization expired, it left Nevada businesses without the financing tool. Since 2007, Ex-Im authorized and insured $180 million in export value in Nevada.

“Ex-Im creates American jobs. It creates Nevada jobs,” Amodei said. “And it does so while generating billions of dollars for the U.S. Treasury. Since 1990, Ex-Im returned $7 billion more than its appropriations.”

He argued that Ex-Im wasn’t corporate welfare, but instead described the agency as a “success story.” Amodei said that every day “we don’t reauthorize it means Nevada jobs are on the line.”

LAS VEGAS BUSINESS PRESS – Nevada could benefit from Trans-Pacific Partnership

The United States and 11 other Pacific Rim nations have finalized a new trade agreement, which has been described as the largest regional trade deal in history.

The Trans-Pacific Partnership still needs U.S. congressional approval, a process that could last for months as bipartisan opposition rises against the backdrop of a presidential election year.

Negotiations were completed in October. Local business organizations and analysts are cautious about the effect the trade deal will have on Southern Nevada.

“Generally, we are very supportive of elevating Southern Nevada’s position as a global business destination,” said Jonas Peterson, president and CEO of the Las Vegas Global Economic Alliance. “That said, the Trans-Pacific Partnership is a lengthy agreement that has not been fully released yet.”

Peterson said he would like to have the opportunity to review the agreement. He expects the trade deal will likely affect Nevada, although perhaps not in ways that the region expects.

“For instance, China is our largest Asian trading partner, and they are not contemplated in the Trans-Pacific Partnership,” Peterson said. “It’s also interesting that the Trans-Pacific Partnership often gets framed as an Asian trade deal. In Nevada’s case, the Pacific Rim countries of Canada and Mexico are our largest trading partners in the partnership.”

Meanwhile, Peterson said the deal could alter freight traffic at West Coast ports, “which could affect Nevada businesses within the logistics and goods movement sector of the economy.”

But how and if that ultimately plays out, positive or negative, is hard to say, Peterson said.

Stephen Miller, director of the Center for Business and Economic Research at UNLV, said on balance, trade deals are good for the economy, but there will be some losers.

Miller said there may be domestic products, which benefited from tariff and regulatory barriers that will now disappear. He said removing those barriers may cause some domestic products to disappear because their costs will rise making them no longer competitive with cheaper imports.

When asked if those losers could include Las Vegas-based gaming companies, Miller doubted it, saying gaming and tourism companies would benefit from more access to foreign markets.

Federal trade officials said the deal brings together countries representing two-fifths of the global economy from Canada and Singapore to Japan and Vietnam.

Christopher Thornberg, a founding partner of Beacon Economics, said the Trans-Pacific Partnership was about creating a “level playing field for U.S. companies in foreign countries.”

The deal would eventually phase out over 18,000 tariffs that foreign countries impose on America goods, according to the U.S. trade representative’s office. Those tariffs affect autos, information technology and consumer goods, among other goods and services.

Thornberg joined Peterson in commenting on China’s absence, saying the omission was deliberate and a consequence of that nation’s “bullying” of Vietnam and other countries over natural resources and building man-made islands.

“This is creating a trade ring around China, but really a trade coalition that will stand up to China and say ‘no you can’t do that,’ ” Thornberg said.

Nevada’s economy has become more dependent on international trade in recent years as the governor’s economic development office has focused on diversifying an economy that has been dependent for decades on gaming, mining and construction.

As of July 30, Nevada’s total exports were $7.7 billion, according to data compiled by the Commerce Department’s International Trade Administration. The state’s largest trading partner was Switzerland with $2.4 billion, followed by Canada at $1.3 billion, and China with $584 million in exports.

In terms of exports, the state’s largest category was primary metal manufacturers, which accounted for $2.9 billion of Nevada’s total merchandise exports. Other top exports were computer and electronic products, $1.6 billion; miscellaneous manufacturers, $926 million; and minerals and ores, $598 million.

Broken down by metropolitan areas within Nevada, the Las Vegas, Henderson and Paradise areas have a 25.8 percent share, or $2.5 bil