Charging Cannabis Gets Even Harder

July 12, 2012

Marcia Frellick, Credit Card Guide

American Express already stopped allowing credit card transactions for medical marijuana, leaving Discover the only way to pay with plastic for medical marijuana.

That, advocates say, leaves patients with decreased access to treatment and forces dispensaries to deal with the challenges — and dangers — of going cash-only.

Leaving the business
American Express stopped allowing payments for medical marijuana in 2011. The company said in a statement: “It is our policy to adhere to the federal law in such matters.” Although 17 states and the District of Columbia have passed individual laws to legalize medical marijuana, federal law still considers the drug illegal.

Visa’s and MasterCard’s departure, meanwhile, is a bit murkier, and it’s unclear whether it was the card companies or merchant service providers (the middlemen between retailers and credit card companies) behind the decision to pull the plug.

The announcement itself came from merchant services providers. They, rather than Visa and MasterCard, make the decisions on which merchants are acceptable to work with, according to the laws in their state, a Visa spokesman said.

Visa provided this statement: “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.”

MasterCard did not respond to a request for comment.

The merchant service providers’ decision to stop processing Visa and MasterCard payments in these dispensaries likely means they were pressured by the federal government, says Amir Daliri, director of government relations for the California Cannabis Association. He says the providers have been told they could face legal trouble for processing payments for medical marijuana, and “so a lot of them have said ‘yes, ma’am’ or ‘yes, sir.’”

Discover, meanwhile, said in a statement that the company allows acceptance of Discover cards for medical marijuana prescriptions “as long the prescription is in compliance with all applicable laws.”

Scrambling to find a solution
The elimination of plastic as a method of payment for marijuana will affect a lot of businesses. Although numbers vary with openings and closures, medical marijuana dispensaries in California now number about 1,000 (more than half of all medical dispensaries in the country), estimates Kris Hermes, spokesman for Americans For Safe Access (ASA), a national advocacy group based in Oakland, Calif.

“From the dispensary side… they now have no means to accept credit cards and they’re having a very difficult time finding banks that will bank them,” Daliri says. “The whole industry is now on a pretty much cash-only basis,” he says.

Dispensaries in California report they still take Discover, and some have tried to find solutions such as installing ATMs in the stores.

The Vapor Room Cooperative, a popular dispensary in San Francisco, posted on its Facebook page July 1: “Dear VRC members — Due to increasing Federal pressure, 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. In the meantime, Discover card still works.”

The consequences of cash-only
Advocates say a cash-based system is a problem on three fronts.

First, customers carrying large amounts of cash to dispensaries make them — and the businesses — prime targets for crime.

Second, patients who use the drug for medical reasons may find it more difficult to pay for treatment. For example, says ASA’s Hermes, cutting off credit card access may force customers to first find an ATM or bank before they can get their medication.

“We need to see some movement by the federal government in assuring financial institutions including Visa and MasterCard that their businesses are not at risk by allowing legal medical marijuana businesses to work with them,” Hermes says.

Paying by cash could also add costs for people who will have to buy marijuana a little at a time instead of putting a larger amount on a credit card that they can pay off at the end of the month. The extra costs could penalize patients on fixed incomes.

“If you purchase less, you’re going to pay more for it,” Hermes says. At Dockside Co-op in Seattle, for instance, most varieties cost $40 for an eighth of an ounce. So, for a full ounce, customers would end up paying $320 instead of the per-ounce discount price of $280.

Finally, without the ability to accept credit card payments, dispensaries’ hands are tied when it comes to trying to project an image of transparency and legitimacy, says Allen St. Pierre, executive director of the nonprofit National Organization for the Reform of Marijuana Laws (NORML).

“The irony is by pushing all this further away from databases, it pushes this further away from government and marketer control — knowing who has the product and who buys it under what circumstances,” he says. “It would behoove everybody that this stuff be trackable and measurable, and that’s what we get with credit cards and debit cards and lose entirely with cash. Taxes can be reported and all parties would know what the tax burden is.”

Pressure from the government
Federal crackdowns on California’s medical marijuana industry have been an ongoing issue, with arguments of zoning and tax violations and charges that the shops are selling marijuana for purposes other than medical treatment.

California is the primary target for federal crackdowns because, unlike some other medical marijuana states, it has no real state regulation for the industry, St. Pierre of NORML says. For example, he notes, there’s no state-level medical marijuana law enforcement division, as there are in states such as Colorado, so regulation differs by region.

One of the dispensaries targeted by federal authorities has been Harborside Health Center, reportedly the largest dispensary in the country, with locations in Oakland and San Jose, and the subject of the reality TV show “Weed Wars.” This week it came under renewed federal attack. The center reported that Drug Enforcement Agency agents taped a notice of property forfeiture to the doors of both of Harborside’s facilities. Harborside has vowed on its website to remain open.

Yet, in the Vapor Room’s case, the fight is soon to be over. It announced this week that it will close July 31, citing federal pressure.



Be the first to Comment

Please check your e-mail for a link to activate your account.