August 12, 2019

California Senate Bill 51 Would Allow Limited Charter Banks or Credit Unions to Issue and Cash Special Purpose Checks



A bill making its way through the California legislature would establish a state-run banking entity that would provide some services to the cannabis industry. According to Insurance Journal, Senate Bill 51, “would create the Cannabis Limited Charter Banking and Credit Union Law.” The law would allow limited charter banks or credit unions to issue and cash special purpose checks for certain uses, such as paying taxes and fees to the state, as well as rent and payments to vendors.

While some state-legal cannabis businesses can obtain bank accounts from local banks and credit unions, such accounts frequently constitute a significant ongoing expense. Banks and credit unions that serve cannabis businesses typically charge high fees simply to maintain an account, as the bank must comply with onerous reporting requirements mandated by the federal government. Providing a bank or credit union adequate documentation to meet such requirements can also be a source of increased labor costs for cannabis businesses. Additionally, gaining a bank account does not give a cannabis business the ability to accept non-cash payments, meaning that it does not solve the issue of taking in, storing, accounting for, and transporting large amounts of currency.

Consequently, if SB 51 were to pass it would likely alleviate at least some of the burdens related to banking. Also, special-purpose, limited charter cannabis banks would presumably not charge exorbitant account fees, as their express purpose is to expand banking services to greater portions of the industry. The Journal report notes that SB 51 has already made its way through several committees with little opposition and would take effect immediately if passed into law. How much time it might take for its provisions to be implemented, though, is unknown at this point.