SCHUMER: GROWTH OF FLOURISHING CNY INDUSTRIAL HEMP INDUSTRY BEING HINDERED BY LACK OF ACCESS TO TRADITIONAL FINANCIAL SERVICES ON RECENTLY-LEGALIZED CROP; SENATOR URGES FEDS TO ISSUE NEW GUIDANCE TO ASSURE FINANCIAL INSTITUTIONS OF HEMP LEGALITY ASAP, TO BETTER HARVEST POTENTIAL OF VERSATILE CROP FOR CNY FARMERS
On Heels Of The Legalization Of Industrial Hemp Growing And Selling, Many Banks & Other Financial Institutions Are Grappling With Confusion Over Legal Status & Refuse To Provide Services
Schumer Calls On Major Fed Financial Regulators To Rectify Situation, Immediately Issue New Guidance To Financial Institutions, To Ease Concerns & Help Upstate Hemp Industry—And Economy—Grow
Schumer To Feds: It’s Time To Let Farms Cash In On Cash Crop!
Standing at Main Street Farms in Cortland County, flanked by growers, producers and industry experts, U.S. Senator Charles E. Schumer today launched a new push to iron out a thorny issue for the burgeoning industrial hemp industry in Upstate New York. Even though the 2018 Farm Bill—including Schumer’s Hemp Farming Act of 2018—legalized the production and sale of industrial hemp, financial institutions have continued to question whether they can extend their services and products to industrial hemp-oriented businesses. Schumer explained that without access to traditional financial services, the industrial hemp industry Upstate and in Cortland County is being unfairly restricted, preventing further economic growth and the creation of good-paying jobs. To address this issue, Schumer requested that the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) issue expedient guidance to financial institutions confirming the legality of providing services to the industrial hemp industry, to better help it seed and grow across Upstate New York.
“The industrial hemp industry is seeding and growing all over Upstate New York, with new businesses like Main Street Farms popping up left and right, which is why I fought so hard to strip the burdensome and outdated federal regulations from it by passing the Hemp Farming Act of 2018. However, if these businesses aren’t able to get financing from a bank or find a credit card processor that doesn’t charge them an arm and a leg, none of that matters all that much,” said Senator Schumer. “If the financial institutions aren’t given updated guidance by the major federal financial regulators clarifying the legality of industrial hemp, the industry in Central New York and producers like Main Street Farms will continue being tightly bound, prevented from growing and creating the good-paying jobs they’d otherwise be able to. That’s why I’m urging the FDIC, Federal Reserve and OCC to issue updated guidance to the financial institutions looking to provide services to industrial hemp-oriented businesses as soon as possible, to help growers, producers and industry harvest the massive potential of this versatile crop.”
Schumer explained that since the 2018 Farm Bill removed the federal regulatory shackles from industrial hemp production, manufacturing and selling, New York’s industrial hemp industry has started to grow significantly, with new farms and businesses emerging and existing ones expanding operations. This has brought considerably more good-paying jobs and revenue to Upstate New York, making industrial hemp a critical new part of the state’s agricultural future. For example, Canopy Growth recently held a groundbreaking celebration for its new industrial hemp industrial park in Broome County, which will bring 400 new jobs to the region, with the potential for many more industrial hemp-oriented businesses to locate to the region. That being said, as industrial hemp farmers and businesses are exploring the full benefits of the 2018 Farm Bill, they have experienced serious difficulty accessing financial products with regulatory uncertainty at financial institutions. While some companies have agreed to offer financial services to the growing hemp industry, many have not due to confusion over the crop’s legal status.
While the enactment of the 2018 Farm Bill did legalize the production and sale of industrial hemp at the federal level, many financial institutions are still uncertain if they can extend services and products to related businesses. Without consistent access to these traditional financial services, such as checking accounts and credit, many industrial hemp businesses have faced difficulty expanding beyond their basic business operations. Small businesses and new entrants are hit hardest by these regulatory uncertainties.
Schumer pointed to Main Street Farms as the perfect example of an industrial hemp business brimming with potential that’s being tightly bound by the lack of regulatory clarity. Main Street Farms has a 100-acre industrial hemp farm in the Town of Cortlandville, and just recently announced plans to open up a processing facility in the city of Cortland. According to Main Street Farms, the two operations expect to employ a combined 80 people. However, Schumer detailed, Main Street Farms went to five different banks to get financing after the passage of the 2018 Farm Bill and was turned down by all five, due to its association with industrial hemp. While the company did find a local credit union willing to offer their services, the inconsistent access to financial services made launching their business challenging. Furthermore, Main Street Farms had to pull numerous products off its website, as those products prevented credit card processors from working with the company. There are a couple of credit card processors that will work with Main Street Farms and similar industrial hemp-oriented businesses, but charge well above average rates. Additionally, the lack of access to financial products not only affects the hemp businesses, but its employees as well. Schumer said his office has heard stories from employees of hemp businesses being unable to access private loans due to the nature of their employment.
Schumer explained that in order to alleviate these concerns, updated guidance would better help financial institutions assess risk and make available a wider range of financial products to industrial hemp cultivators and manufacturers. It is critical that industrial hemp farmers and businesses have access to the financial resources they need to keep their business running successfully and industrial hemp a part of New York Agriculture. Therefore, Schumer called on the Federal Reserve, FDIC, and OCC to provide guidance and best practices to the financial institutions under their authority that are looking to serve hemp farmers and businesses, to allow them to recognize hemp as a legal agricultural commodity as it was set forth in the 2018 Farm Bill.
Schumer was joined by Allan Gandelman, Owner of Main Street Farms and President of New York Cannabis Growers and Processors Coalition, Dan Dolgin of JD Farms in Madison County and local officials.
The Schumer-backed Hemp Farming Act of 2018 was introduced by Majority Leader Mitch McConnell (R-KY), Sens. Rand Paul (R-KY), Jeff Merkley (D-OR) and Ron Wyden (D-OR). It passed and was signed into law as part of the 2018 Farm Bill. This legislation:
- Removes industrial hemp from Schedule 1 of the Controlled Substances Act
- Empowers states to be the principal regulators of hemp
- Allows hemp researchers to apply for competitive grants from the U.S. Department of Agriculture (USDA); and
- Makes hemp farmers eligible to apply for crop insurance
Industrial hemp is a type of cannabis plant that is grown largely for industrial uses, but it can also be utilized for food, oil, and cosmetic products. Hemp contains a very small amount, typically between 0.2 and 0.3 percent of tetrahydrocannabinol (THC), and while from the same species of plant as marijuana, it has varied widely in use. However, due to the existence of THC in hemp, Schumer explained, both plants were considered “controlled substances” under federal law, meaning the U.S. Drug Enforcement Administration (DEA) was the primary regulator for hemp production. Schumer argued that this narrow view has undermined the crop’s agricultural and economic potential. With the Hemp Farming Act of 2018 passed by Congress and signed into law last year, this unnecessary roadblock has been lifted, and industrial hemp’s significant potential to become a cash crop in Upstate New York will be unleashed.
A copy of Schumer’s letter to the Federal Reserve, FDIC, and OCC appears below.
Dear Chair Powell, Chair McWilliams, and Comptroller Otting:
I write to request that the Federal Reserve, Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) provide guidance to financial institutions looking to provide services to the growing hemp industry. In 2018, Congress passed the Agricultural Improvement Act (2018 Farm Bill), removing hemp as a schedule I controlled substance. This law removes the obstacles that have prevented hemp businesses from gaining access to all financial services and products available to other agricultural businesses.
The Hemp Farming Act of 2018, which I was proud to cosponsor and fought to include in the 2018 Farm Bill, did five important things for farmers nationwide, including in my home state of New York. The 2018 Farm Bill removed industrial hemp from Schedule I of the Controlled Substances Act, empowered states to be the principal regulators of hemp, allowed hemp researchers to apply for competitive grants from the U.S. Department of Agriculture, made hemp farmers eligible to apply for crop insurance and allowed industrial hemp to be grown as an agricultural commodity if farmers choose. Since the bill’s passage, the New York hemp industry has grown significantly, as new farms and businesses have emerged and existing ones have expanded. This has brought considerably more jobs and revenue to New York, making hemp an important part of the State’s agricultural industry. As hemp farmers and businesses are exploring the full benefits of the 2018 Farm Bill, however, their growth has been hampered by regulatory uncertainty at financial institutions that has effectively led to a lack of access to financial products and services.
The enactment of the 2018 Farm Bill legalized the production and sale of hemp, yet financial institutions have continued to question whether they can extend their services to hemp-related businesses. Without access to traditional financial services, such as checking accounts and credit, many hemp businesses have been unable to effectively expand beyond their basic business operations. In order to alleviate these concerns, updated guidance would provide certainty for financial institutions to assess risk and make available a wider range of financial products to hemp cultivators and manufacturers. Small businesses and new entrants are hit hardest by these regulatory uncertainties. It is critical that hemp farmers and businesses have access to adequate financial resources maintain and grow their operations, if hemp is to become an integral part of the New York agricultural enterprise.
It is important that financial institutions recognize hemp as a legal agricultural industry as set forth in the 2018 Farm Bill. I urge the FDIC, Federal Reserve, and OCC to provide guidance and best practices to the institutions under their authority that are looking to serve hemp farmers and businesses.
Thank you for your consideration of this matter.