Cannabis Merchant Account Crackdown
President Trump and Attorney General Jeff Sessions completely scared off financial service providers. Major companies like Paypal, Square, and Stripe purged companies selling ancillary marijuana products around January and February earlier this year.
Entrepreneurs speculate that this happened because Trump’s brilliant idea of suggesting that the feds regulate recreational pot even more, and AG Jeff Sessions referred to the legal cannabis industry as “violent”. Using menacing language like this rocked the boat, and as a result businesses that sell CBD products, software, and even vaporizers were affected. Payment processors basically kicked them out as customers.
According to an article on Inc.com, Shanel Lindsay of Boston startup Ardent which produces a decarboxylating device used to cook cannabis flowers, was kicked out of Square, Stripe, PayPal, and at least 4 other online financial services. As a result she missed three weeks’ worth of sales since she had to wait to be approved by offshore financial providers during the first two months of Trump’s administration.
Cannabusinesses throughout the country felt the shock. "Everyone running an ancillary business got kicked off all at once," Lindsay said. "It was an unrelenting wave; you could not deny it. All of the banks seemed to be highly attuned to the issue and there was no flying under the radar."
As if cannabusinesses didn’t have enough problems to worry about especially when it comes to dealing with banks and payments, this time it was much worse. Previously, banks had to face yearly compliance reviews from the feds and internal audits were done. Businesses that were perceived to be too risky were shut down. However, during President Obama’s term he helped loosen up the situation by encouraging banks to work with cannabis businesses although his memo was not binding.
To add insult to injury, here comes White House Press Secretary Sean Spicer saying tht he thinks there will be greater enforcement on recreational cannabis, and Sessions comes out using more menacing language about the legal cannabis industry. Banks expunged cannabis-related accounts. Even if you look at the terms of service of payment processing giants like PayPal, it’s clear that cannabis businesses are viewed as pariahs. They state that cannabis and ancillary cannabis businesses are prohibited from using their services. Banks underwrite services like PayPal so in the event that a bank is required to purge a business, these guys have to do the same thing. However, PayPal, Stripe, and Square spokespeople deny that these moves have anything to do with the Trump administration.
Stephen Brudner, who founded Merchant Services Consulting Group, a business that matches companies with payment processors, there was a sudden spike in interest from companies who were getting in touch on February. Naturally, they all asked for help to get on payment processors but he was unable to help them. "Our phones rang constantly. People selling vaporizers, CBD products, other ancillary companies, we just had to tell them we don't have a home for you right now," says Brudner. "Ancillary marijuana companies are considered 'unbankable' at the moment."
The cannabis industry continues to grow and there are no signs that it’s going to slow down. Because of this, there will always be payment processors and banks that are willing to take the risk and work with cannabuisnesses although payment processors who operate overseas have to face a more challenging situation.
Lindsay’s payment processor emailed her saying that the business was “suspended by our bank”. According to the processor, the bank identified transactions which were used to pay for prohibited products although they didn’t divulge any more details. As if that wasn’t enough, the processor told Lindsay that the $35,000 in her account would be held for 90 days to protect themselves from disputes and charge backs, severely affecting the cash flow of her business.
April 20 is just a few days away, which is officially the biggest cannabis holiday of the year, translating to a surge in sales for businesses. However, since they have to deal with a lack of payment issues April 20 could actually be problematic. Instead of celebrating the green rush from the holiday, cannabis businesses will be scrambling to find solutions to their banking problems.
OTHER STORIES YOU MAY ENJOY..
XCI COIN FOR CANNABIS PAYMENTS, CLICK HERE.
OR..
