The adoption of a law, commonly known as the farm bill, in December 2018 legalized domestic industrial hemp, gave a much need boost to those in the struggling agriculture industry, and gave a generous hoist to Senate Majority Leader Mitch McConnell’s 2020 re-election campaign.
Prior to the new law, McConnell, who proudly touts himself as a politician not a public servant, visited hemp farmers and processing facilities in his home state of Kentucky. He carefully ensured those suspicious of the legislation and the crop was different from the mood-altering drug, marijuana. He also knew the potential of the lucrative cash crop and that it would be a great achievement to boast about leading up to his potential re-election to the Senate. Additionally, since Kentucky already had a hemp pilot program in place, this also gives McConnell an opportunity to brag about the commonwealth’s farmers chance to have an edge over its competitors.
The 2018 Farm Bill is more than just a godsend to farmers and politicians. The legislation will move the industry into the fast lane, likely prompting more businesses than ever to enter the CBD oil and other hemp product sales market and to seek payment processing and merchant account services.
Details About the Farm Law
The farm bill and the new hemp program not only enables hemp growers to get access to crop insurance, but it removes the hemp crop from the federal government’s list of controlled substances list. This move takes regulation out of the hands of the U.S. Department of Justice and into the hands of the U.S. Department of Agriculture.
Prior to its adoption, federal law prohibited the production and sale of hemp, which is the fiber of the Cannabis plant. Previously, federal laws also prohibited the sale of hemp products, which often include rope, clothing, and paper. Under the newly-adopted law, any part, extract, or derivative of the Cannabis plant that has a THC concentration of not more than 0.3 percent on a dry weight basis is legal.
Nothing in the federal law decriminalizes marijuana, which also comes from the Cannabis plant.
Issues with the Law
As hemp and CBD oil merchants begin pursuing merchant accounts, which allow them to accept debit and credit card transactions, they can expect to run into some challenges from banks. The main problem is what the law fails to clarify.
The law requires a regulatory framework for the required licensing and oversight of the industry. However, these frameworks have not been established. This will leave banks guessing about what the government will, and they do not like this because it opens them up to more potential financial risk.
The law also fails to address states’ roles in the new program. Just like the many states that have adopted their own medical and recreational marijuana use laws, the federal government has not decriminalized the use or sale of this part of the Cannabis plant. This could pit states and federal governments against each other, meaning some states could choose to prohibit the production, use, and sale of hemp products while others many honor the federal law.
The Scoop on Getting Payment Processing for CBD Oil and Hemp Products
With many uncertainties surrounding the legalizing of hemp, merchants looking for payment processing should expect most banks to shy away from your business. Traditional financial institutions fear confusing laws, so expect them to pass on doing business with you.
The best option is to seek third-party merchant service providers that will be willing to take on the risks associated with selling CBD oil and hemp-related products. However, do not think this means you will be getting off easy.
They will treat you like high risk merchants, so expect to pay higher processing rates, to be monitored more closely to ensure you are operating a legal business, and expect to put up a rolling reserve. A rolling reserve is money you need to put up and allow your processor to hold for you. This money is used if you fail to pay refunds or chargeback fees or do not have the funds to cover them. This is a fairly standard requirement for high risk businesses.
Ready to Apply?
This new law opens the door for those who produce and sell CBD oil and other hemp products to really make a place for themselves in the mainstream market. Despite the legal ambiguities, you can still get payment processing for your business. When you are ready to apply for a CBD oil merchant account, turn to eMerchantBroker.com (EMB). EMB offers a simple online application process.