News Column

Credit, debit transactions for pot

January 16, 2014

By Hadley Malcolm, USA TODAY

Can you use plastic to pay for weed? Card processors and peddlers aren't entirely sure, thanks to lack of guidance from the government. The sale of marijuana for recreational use became legal in Colorado and Washington on Jan. 1 . For a market that has traditionally dealt in cash payments, the new laws have left open the question of whether dispensaries will be able to accept credit and debit cards the same as any other business. Some already are, though they're reluctant to admit how they're able to do so. A Cut Off The Top, a dispensary in Denver , has an advertisement in a recent issue of a local paper called Westword that says it now accepts Visa and MasterCard . A request for comment via e-mail wasn't returned. Despite the Department of Justice saying last year that it would not prosecute states that have made the sale of marijuana legal, weed is still technically illegal at the federal level; that leaves card processors unsure how to advise banks, and makes banks wary to do business with dispensaries. A bank account is required for a business to be able to accept credit and debit transactions. "No matter which way you approach it the banks are still subject to requirements under federal law," says Rob Rowe , a vice president in the American Bankers Association's Center for Regulatory Compliance. "Most banks we've talked to have come to the conclusion that there's too much risk for offering services to these dispensaries." Visa said last week it would accept the transactions if a local acquirer -- namely, banks or third-party companies that work with businesses to set up an account to take credit and debit card transactions -- decides to treat the purchases as legal. "Given the federal government's position and recognizing this is an evolving legal matter with different standards applicable in different states, our local merchant acquirers are best suited to make any determination about potential illegality," Visa said in a statement. MasterCard told USA TODAY that it is "seeking guidance from the federal government. Our rules require our customers to conduct lawful activity where they are licensed to use our brands. Given the complexity of this situation, we will continue to seek guidance and inform merchant acquirers of any new developments." It's unclear how banks and third-party processors will interpret these positions. Bank of America declined to comment for this story. A representative for First Data, one of the largest payments processors, says the company does not accept merchants that sell either medical or recreational marijuana. Wells Fargo told USA TODAY that given federal law still considers marijuana illegal, it "does not knowingly provide payment processing for these businesses." Some banking experts suspect dispensaries that are accepting debit and credit cards opened a bank account by not being upfront about the business. Because there's no transaction code for marijuana dispensaries, purchases likely show up on statements under other names that don't let on what the customer bought. "It's being processed in such a way that it's not really apparent to the bank that it's an illegal transaction," Rowe says. Brennan Linsley , AP

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Source: USA Today

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