Pubdate: Thu, 12 Jul 2012
Source: San Francisco Chronicle (CA)
Copyright: 2012 Hearst Communications Inc.
Contact: http://www.sfgate.com/chronicle/submissions/#1
Website: http://www.sfgate.com/chronicle/
Details: http://www.mapinc.org/media/388
Author: Andrew S. Ross

CREDIT CARD FIRMS BALK AT POT SALES

If you're about ready to refill your supply of medical marijuana, you 
might want to stop by an ATM first. In the past few days, a number of 
Bay Area dispensaries have told their clients that from now on it's 
cash only, because Visa and MasterCard aren't allowing their cards to 
be used for marijuana purchases anymore.

"Visa and MasterCard are now refusing to accept your credit card 
charges for your medicine at many Bay Area dispensaries. We are 
working diligently to address this issue quickly," Vapor Room, a 
Haight Street dispensary, told members Sunday.

Harborside Health Center in Oakland sent its patients a similar 
message, blaming a "continuing federal threat of seizure against 
financial institutions."

In fact, Harborside, the largest medical marijuana dispensary in the 
country, is facing a federal seizure threat of its own. On Wednesday, 
it was served notice from the U.S. attorney's office in San Francisco 
that its facilities in Oakland and San Jose are subject to forfeiture 
because they are being used to "distribute and cultivate marijuana." 
Lea Suzuki / The Chronicle 2011 Salesman Steve Shulenberger assists a 
customer at the smokables, edibles, concentrates and seeds counter at 
Harborside Health Center in Oakland.

The decision by the credit card companies is an apparent reaction to 
the ongoing federal crackdown on medical marijuana dispensaries 
nationwide. Although marijuana for medical use is legal in 17 states 
plus the District of Columbia, it remains verboten as far as federal 
law, and the feds continue to take a dim view of commerce surrounding 
the practice.

"This has been going on for at least two years, with major financial 
institutions purging medical marijuana dispensaries from their 
transactions," said Kris Hermes, a spokesman for Americans for Safe 
Access, a national advocacy group based in Oakland.

For its part, San Francisco's Visa said Wednesday, "Our policy is 
that Visa cards should only be used in connection with legal 
transactions. We do not allow the Visa payment system to be used for 
any illegal activity and have banned illegal transactions on Visa 
cards. Merchant banks, also known as acquirers, are responsible for 
ensuring that their merchant customers comply with all applicable laws."

Calls and e-mails to MasterCard were not returned. Turned away at 
banks: Hermes said that the dispensaries are also having trouble 
finding a bank that will take their business. Bank of America, 
Citibank and JPMorgan Chase are reported to have closed off their 
teller windows to the businesses, as has San Francisco's Wells Fargo, 
which up until last year was offering accounts to local dispensaries.

"In view of the complex, inconsistent legal environment relating to 
medical marijuana dispensaries, Wells Fargo Regional Banking has 
opted not to bank these businesses," the bank said last year. "The 
policy extends to all medical marijuana dispensaries, and ... we have 
advised all such businesses that bank with us that they will need to 
close their deposit accounts. Additionally, it has been our policy 
not to provide merchant card processing services to businesses of this type."

That means Wells Fargo debit cards can't be used either, which comes 
as an additional blow to the dispensaries. Meanwhile, Square, the San 
Francisco mobile payments platform, is also cracking down on 
dispensaries that use its service. "Dispensaries are a violation of 
our terms of service. We have and will continue to shut down any 
users who do not follow the rules," Square said Wednesday. Deaf ears: 
Responding to the concerns raised by the banks, 15 members of 
Congress, including Reps. Zoe Lofgren, D-San Jose, Pete Stark, 
D-Fremont, Sam Farr, D-Monterey - oh, and Ron Paul, R-Texas - asked 
U.S. Treasury Secretary Timothy Geithner in May 2010 to assure 
financial institutions "whose account holders are involved in a 
business ostensibly operating in compliance with a state medical 
marijuana law," that they would not be targeted by the department. 
Two years on and Geithner has yet to respond.

Earlier, in October 2009, U.S. Attorney General Eric Holder issued a 
memo telling U.S. attorneys around the country they "should not focus 
federal resources in your states on individuals whose actions are in 
clear and unambiguous compliance with existing state laws providing 
for the medical use of marijuana."

The congressional appeals and Obama administration memos appear to 
have had little effect. Besides the threat of foreclosure, 
Harborside, for example, is embroiled in a $2.5 million dispute with 
the IRS over a claim the dispensary illegally deducted business 
expenses such as payroll taxes, rent, health insurance and workers' 
compensation, because it was involved in what the IRS labeled "the 
trafficking of controlled substances."

All this means that legalized medical marijuana businesses are having 
to conduct transactions in the same way as those who traffic in the 
substance illegally - in cold, hard cash. Some dispensaries already 
have ATMs in their offices, but that doesn't lessen the potential 
criminal hazards.

"Dispensaries are now having to deal with large amounts of cash," 
said Hermes. "That's not to say security at the facilities aren't 
adequate, but it does put them at greater risk of being robbed. These 
are issues everyone is struggling with."
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MAP posted-by: Jay Bergstrom