New Farm Bill Legalizes Hemp and CBD Oil

Jan 03, 2019

Legalized Hemp and CBD Oil Triggers Surge in Processing

The newly-adopted law, most commonly referred to as the 2018 Farm Bill, legalizes hemp, which will likely encourage more businesses that sell CBD oil and other hemp products to seek payment processing and merchant account services.

Understanding the Farm Bill

Until the adoption of this law in December 2018, federal law prohibited the production and sale of hemp, as well as products made with it. The law requires a regulatory body be created to monitor and regulate this industry, but it still prohibits the possession, manufacturing, and distribution of anything that falls under the government’s definition of marijuana.

The law exempts hemp, which is 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, according to the law.

Ambiguities in the Law

Though hemp production is legal, the law also states that it is illegal to produce it in any state that does not have a plan in place to address it or does not have federal licenses. To date, there are no licenses, plans, or regulations in place. Therefore, it is expected that traditional banks and processors may continue to be cautious until lawmakers close the gap in the law.

The law also fails to establish a regulatory framework for the required licensing and oversight of the industry. This not only will take time for state and federal governments to establish this regulatory framework, but this also will leave banks guessing as to what the governments’ expectations will be.

Another thing left out of the law is how individual states will treat the federal government’s new law. Just like many states have adopted their own marijuana use laws, the federal government has not decriminalized the use or sale of the plant. The same could happen with hemp, meaning some states could choose to prohibit the production, use, and sale of hemp products despite the federal law.

How Do Existing Laws Reconcile the Changes About Hemp in the New Law?

Under the farm bill, the Secretary of Agriculture is the only body that has the authority to regulate hemp production, but it does not address how the U.S. Food and Drug Administration fits in with these changes. Currently, the FDA considers dietary supplements and foods containing CBD unlawful. This will remain an issue until the FDA changes its position or someone challenge the federal agency’s claim in court. Until this and some of the other areas are worked out, the farm bill creates a fuzzy gray area for those financial institutions that will be asked to approve processing for hemp businesses.

What Hemp Producers Should Expect from Banks

With many questions still surrounding the new law, if you are a hemp producer seeking merchant accounts and payment processing, expect most banks to shy away from your business. Confusing laws scare off traditional financial institutions because they do not want to take on any additional risk.

Where Do Hemp Producers Turn for Payment Processing

Despite some of the unknowns in the law, some third-party merchant account providers will offer services to those in the hemp industry, like those selling CBD oil. Nevertheless, expect to be treated like other high-risk merchants. Expect to pay higher processing rates, to be monitored more closely to ensure you are not engaged in any unlawful activity, and anticipate agreeing to a rolling reserve.

When You Are Ready to Apply

The federal government moved in the right direction for those who produce CBD oil and other hemp products. Despite the murkiness surrounding the law, you can still get payment processing for your business. When you are ready to apply for a merchant account, so that you can accept credit cards for transactions, then turn to (EMB).

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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