CUs Won’t Be Sanctioned for Providing Marijuana Banking: NCUA Chairman Hood

Credit unions in states where marijuana is legal won’t be sanctioned for providing services to cannabis-related businesses as long as they follow money laundering, Bank Secrecy Act, safety and soundness and other rules, NCUA Chairman Rodney Hood said Friday.

“It’s a business decision for the credit unions if they want to take the deposits,” Hood told CU Times, in a wide-ranging interview at NCUA headquarters in Alexandria, Va.

He added, “We don’t get involved with micro-managing credit unions.”

He said that credit unions that provide services to cannabis-related businesses must comply with FinCEN rules, file Suspicious Activity Report and must strictly adhere to other rules.

Then, they will not be cited for merely doing business with cannabis firms, Hood said.

Marijuana-related businesses have said that they have had trouble obtaining financial services because marijuana remains illegal on the federal level. They have said that banks and credit unions have expressed concern that they will be cited for conducting business with them even if they follow all other rules.

Congress is considering legislation that would provide a safe harbor for those financial institutions.

Hood said that Congress could remove all ambiguity if it enacted legislation to declassify marijuana.

Payday Alternative Loan Program

Addressing another hot-button issue, Hood said he expects the NCUA to update its Payday Alternative Loan program model by the end of the year.

The NCUA has issued proposed rule calling for another Payday Alternative loan mode, but the proposal was panned by credit unions and consumer advocates.

Hood said he will be meeting with some of those groups, including the Pew Charitable Trust and the Leadership Conference on Civil Rights.

Credit unions should be able to provide short-term, small dollar loans so borrowers do not have to rely on store-front payday lenders, according to Hood.

“If we, in the credit unions, don’t have alternatives to payday loans, do you know who’s waiting in the wings?” he asked. “Pernicious payday lenders who don’t have the borrower’s interests in mind.”

Ideally, Hood said, the PAL model would help borrowers use the loans as a stepping-stone toward obtaining more sophisticated financial services.

Critics have said that few credit unions now use the PAL model, but Hood said that does not mean they are not offering short-term loans.

“Many credit unions may not be using PAL because they have their own products,” he said.

Hood said if there is one issue “that keeps me up at night,” it would be cybersecurity.

He said as chairman, he has created a new position, special assistant to the chairman for cybersecurity, adding that the appointee is a former Defense Department official.

Financial Inclusion and Minorities

Hood said that the agency will continue its focus on financial inclusion, saying that many minority communities have been “overlooked and underserved.”

“I think that financial inclusion is the civil rights issue of my generation,” the chairman said, adding that he wants to ensure that the NCUA allows credit unions to serve members in underserved communities.

“I want to make sure that we are providing them with the flexibility and regulatory relief to serve their members,” he said.

Hood said his life experiences, in part, contributed to his concern about financial inclusion.

“I think that as a person of color, I’ve embraced it even more because it’s been my life story,” he said.

He said he is meeting with groups to encourage connections between credit unions and minority groups and businesses. For instance, he recently spoke at the Urban League’s national conference, is meeting with the African American and Hispanic chambers of commerce and said the agency is reaching out to Historically Black Colleges and Universities.

Hood said he wants the agency also to find ways to better use new financial technology and to encourage credit unions to do the same.

Most financial regulators, including the NCUA, are using software that is 30 or 40 years old. The NCUA is in the process of modernizing the call report and examination systems, using new technology.

By continuing to focus on risk, the credit union system can be prepared when an inevitable economic downturn occurs, the chairman said

The new modernized call report system will allow the agency to look at credit unions “in even more real-time,” he said, adding that one of the keys to surviving economic downturns is ensuring that credit unions are well-capitalized.

Hood said that the credit union system weathered the last economic downturn and will be able to do the same in the future.

“We have always remained nimble,” he said. “We have always been that port in the storm.”

He added, “None of our credit union members have lost a dime [of insured deposits] during those last downturns.”

Hood also said that he does not pay attention to the attacks on credit unions by the banking industry.

“There’s enough opportunity for all of us to grow, to thrive and to prosper,” he said.