As the hemp-related product industry continues to grow, institutional lenders now have clarifying guidance to consider as they conduct diligence regarding potential borrowers. Specifically, the National Credit Union Administration (NCUA), the federal agency that insures deposits at federally insured credit unions, recently issued a letter providing additional guidance to credit unions servicing hemp-related businesses.
The recent letter does not provide new expectations or requirements for credit unions, but summarizes key updates in federal law under the 2018 Farm Bill, in addition to providing answers to some frequently asked questions regarding hemp regulation. Importantly, the NCUA letter distinguishes frequent misconceptions with respect to federal and state authority and federal regulatory agency oversight, such as the interplay between the U.S. Department of Agriculture (USDA) and the Food and Drug Administration (FDA) related to various hemp and hemp-derived products.
As noted in previous McGuireWoods alerts, there are many regulatory considerations when lending to operators or investors in hemp or cannabis businesses. The NCUA letter provides important clarifying guidance for monitoring ongoing changes in the industry regulatory landscape and addressing compliance obligations.
Key questions addressed and responses issued by the NCUA letter include the following: