Some Kentucky businesses that sell hemp products are still having trouble getting financial services, lawmakers were told during a legislative committee on Wednesday.
Banks are still hesitant to offer loans or credit card processing capabilities to hemp farmers, processors and retailers because of the plant’s similarities to cannabis, even though hemp was legalized by the federal government in 2018.
Kentucky’s Department of Financial Institutions Commissioner Charles Vice said he was frustrated that some banks still are still wary of working with hemp companies.
“We still have a few banks that are hesitant to do that. And in some cases I’ve been told that they’ve asked those individuals in some of those cases to either not produce hemp or to find another financial institution,” Vice said.
The 2018 Farm Bill removed hemp from the list of controlled substances as long as it has less than 0.3% THC, the main psychoactive chemical associated with cannabis.
Earlier this year, some credit card processing companies stopped working with merchants who sell CBD — a therapeutic oil derived from hemp.
Elavon Merchant Services, a subsidiary of U.S. Bank, cut ties with businesses that primarily sold CBD, citing the difficulty “to validate the qualifications required to operate within this industry.”
Kentucky Bankers Association President and CEO Ballard Cassady told lawmakers that he was encouraging banks to work with hemp companies as long as they meet regulations.
“You’ve got to make sure they’ve jumped through all the hoops and they’ve got all the paperwork in place,” Cassady said.
Cassady said that credit card companies are nervous about hemp businesses that are also involved in the legal cannabis industry in other states.
“What Visa, MasterCard and American Express has decided is ‘we’re not going to risk taking receipts from a hemp oil salesperson in Louisville, Kentucky when it may be involved in some other cannabis sales in another state through the bank where they’re doing their banking,’ Cassady said.
In Kentucky, the state Department of Agriculture regulates hemp farming and processing, but doesn’t oversee retailers.
Sean Southard, communications director for the Kentucky Department of Agriculture, said that the state is still waiting for clarity from the federal government on credit card processing, lending, and the Food and Drug Administration’s regulations for CBD oil.
“We’ve got maybe half a dozen issues at the federal level that we need clarity on,” Southard said.
National chains like Walgreens, CVS and Kroger have begun selling CBD products on a limited basis, most only offering topical, non-ingestible products.
Senate Majority Leader Mitch McConnell has touted his role in including hemp legalization in last year’s farm bill. At McConnell’s urging, last month the National Credit Union Administration issued a guidance clarifying that credit unions could provide services to hemp companies.
In an op-ed last month, Senate Majority Leader Mitch McConnell said that he was working to help farmers, processors and manufactures overcome obstacles.
“Unfortunately, several large financial institutions are refusing to recognize hemp’s legality and making it harder for retailers to reach customers and grow their operations,” McConnell wrote.
“I will continue to reiterate the new federal law and Congressional intent with these financial institutions.”