The Complete Guide to CBD Merchant Account Processing - Compliance, Approval, and Retention.
PAYCLY Merchant Services
If you are a high-risk business owner, you can look for incredible way-outs for profitable deals with us.
Introduction
The CBD industry has experienced explosive growth in recent years as more people discover the therapeutic benefits of this non-psychoactive compound. However, CBD merchants have faced significant challenges in finding financial institutions willing to process payments for their businesses. In this comprehensive guide, we'll explore the complex issues surrounding CBD merchant account processing and provide actionable strategies for CBD companies to obtain and retain merchant services.
We'll start with an overview of the ambiguous regulatory environment that has given banks pause. Then we'll discuss the steps CBD merchants can take to ease banks' compliance concerns such as providing documentation and implementing strong anti-fraud measures. We'll also share tips for identifying banks open to the CBD space and building relationships with payment processors. By following the best practices outlined here, CBD companies can navigate this evolving landscape and secure the merchant services vital to their success.
#CBD #CBDmerchantaccounts #cannabidiol #paymentprocessing
The Regulatory Gray Area
The lack of clear federal guidelines has created confusion for financial institutions regarding their ability to provide services to CBD merchants. In 2018, the U.S. Farm Bill legalized hemp and hemp-derived CBD products containing less than 0.3% THC on a dry weight basis. However, the FDA has not issued comprehensive regulations establishing rules for CBD products and their sale. This regulatory uncertainty has led many banks to exercise caution with the hemp-derived CBD sector out of compliance concerns.
Additionally, the DEA and FinCEN have issued guidance asserting that CBD remains classified as a Schedule I substance under the Controlled Substances Act due to its structural similarities to marijuana's main psychoactive component, THC. This classification conflicts with the Farm Bill's hemp provisions. The mixed messages from federal agencies only add to the legal ambiguity that dissuades banks from openly servicing CBD companies.
#CBD #cannabidiol #hemp #FarmBill #DEA #FinCEN #regulations #compliance
Addressing Banks' Risk Concerns
To get a CBD merchant account approved, businesses must take proactive steps to mitigate banks' perceived risks. Companies should compile documentation proving all products contain less than 0.3% THC and are manufactured and distributed according to applicable laws. Testing certificates from a DEA-registered lab analyzing each product batch is essential.
Merchants also need to establish strict age-verification procedures and only sell to states where CBD is legal. Implementing anti-fraud and anti-money laundering policies per FinCEN guidelines reassures banks the business operates ethically. Registering with FinCEN as a money services business if annual sales exceed $1,000 further demonstrates regulatory commitment.
Additionally, CBD companies can purchase separate insurance policies covering issues like product liability, inventory loss, and business interruption to transfer certain risks from banks. Presenting a comprehensive compliance program eases the underwriting process.
#CBD #merchantaccounts #banking #riskmanagement #compliance #documentation #insurance #ageverification #AML
Working with CBD-Friendly Payment Processors
Due to the legal ambiguities, few traditional banks openly provide merchant services to CBD merchants at this time. However, a select group of payment processors have emerged specializing in hemp-derived CBD companies. These alternative payment processors are more familiar with the complexities of the industry and willing to take on the perceived risks.
Top options include CBD-focused processors like CBD Pay, PAYCLY Merchant Services , and CanPay . Larger processors like Stripe and Square have also onboarded select CBD merchants meeting stringent requirements. Working directly with a payment processor experienced in CBD can expedite approval compared to applying with a traditional acquiring bank.
Be sure to thoroughly research each potential partner, checking for industry experience, competitive rates, and service level agreements outlining dispute resolution. Ask about monthly minimum fees and whether equipment is provided. Read reviews from other CBD merchants to gauge the customer experience.
#CBD #paymentprocessing #merchantaccounts #CBDpay #Hypur #CanPay #Stripe #Square #research #reviews
领英推荐
Securing Elusive Merchant Accounts
Even with the right documentation and a CBD-friendly processor, obtaining merchant account approval takes persistence for many CBD companies. Here are additional tips for boosting success:
- Emphasize selling topicals and other non-ingestible products initially as these pose lower risks.
- Start with a sole proprietor LLC and upgrade to an S-Corp or C-Corp as sales increase to demonstrate financial stability.
- Have the business owner, not the company, apply as the personal credit often weighs more than a new company.
- Request a phone call with the underwriter to personally explain compliance measures taken.
- Ask processors for feedback on past declines to address any deficiencies before reapplying.
- Consider private capital funding that doesn't require merchant services for startup costs.
- Pursue alternative payment options like checks, cash on delivery, or cryptocurrency in the interim.
With persistence and creative problem-solving, determined CBD companies can obtain the merchant account approvals needed to accept online and in-store payments.
#CBD #merchantaccounts #paymentprocessing #compliance #credit #underwriting #funding #alternativepayments
Retaining Merchant Account Services
Once approved, it's critical CBD merchants adhere to all regulations and operating procedures to retain processing privileges long-term. This means maintaining comprehensive product testing and inventory management systems. It also requires promptly investigating and resolving any customer disputes that could damage the business's reputation with processors.
CBD companies must also stay on top of evolving laws and guidance. For example, if the FDA releases official rules for CBD products, ensuring swift compliance updates demonstrates a commitment to legitimacy. Proactively notifying the payment processor of any business changes like new product lines or website domains also maintains transparency.
With the industry's fast growth, maintaining strong banking relationships becomes increasingly important. CBD merchants can foster goodwill through open communication, on-time payments, and highlighting their positive impact on local communities. Following both the letter and spirit of all applicable regulations keep merchant accounts in good standing for the long haul.
#CBD #merchantaccounts #retention #compliance #disputes #regulation #communication #reputation #bankingrelationships
Conclusion
As the CBD sector continues to mature, obtaining merchant account processing will become more straightforward for reputable companies operating legally. For the time being, CBD merchants who implement rigorous compliance programs, work with specialized payment processors and proactively address banks' concerns stand the best chance of both acquiring and retaining vital merchant account services.
With persistence, CBD companies can navigate today's regulatory complexities to accept necessary online and in-store payments. By promoting industry legitimacy through best practices, merchants play an active role in shaping CBD's future success and acceptance. With the strategies outlined here, CBD businesses can feel empowered to secure their financial infrastructure and experience continued growth.
#CBD #merchantaccounts #paymentprocessing #compliance #regulations #growth #legitimacy #strategies #future