Credit union CEOs don’t usually wade into politics and actively lobby government for change.
Community Savings Credit Union CEO Mike Schilling, however, sees advocating for changes to cannabis legislation as his duty, which is why he recently went to Ottawa to speak at an industry summit, and meet with political staff in the prime ministers’ office and the office of the minister of finance.
Schilling’s Surrey-based, seven-branch credit union, which has about $900 million in assets under management, has more than 17,000 members, including 150 that are cannabis-sector companies.
“As a credit union, we’re owned by our members – they’re the boss,” he told BIV. “It's part of my job as the CEO to advocate for those issues that impact our members.”
When Canada legalized cannabis five years ago this month, executives in the newly legal cannabis sector started looking for banks that would accept their business accounts.
The big banks tended to shun the ventures.
Representatives at the Royal Bank of Canada (TSX, NYSE:RY) and Toronto-Dominion Bank (TSX, NYSE:TD) told BIV in separate emailed statements in early 2019 that their institutions’ policies were evolving, and that they would assess whether to accept cannabis-sector businesses as clients on a case-by-case basis.
Bank of Montreal (TSX, NYSE:BMO) and the Canadian Imperial Bank of Commerce (TSX, NYSE:CM) continued to turn away cannabis-sector executives who asked to open business bank accounts.
Cannabis sector companies continue to think that big banks are discriminating against them, which is why they launched a potential class-action lawsuit against Desjardins Federation, National Bank, Royal Bank, Bank of Montreal, TD Bank, and CIBC earlier this year.
The choice for many in the early years of cannabis legalization was to go to a small credit union on Commercial Drive known as CCEC Credit Union, which last year merged with Community Savings Credit Union.
“Our board and our leadership team sort of made the decision that we were going to bank these businesses as they're legal in Canada now and they're part of our community,” Schilling said.
“We didn't really realize at the time that the rest of the financial-services industry was going to, really, turn its back on legal cannabis. So we found ourselves being the flagbearer, if you like, for fair treatment of this industry.”
Schilling’s Ottawa trip was with the Canadian Cannabis Council for an event called Grass on the Hill, which took place Oct. 16 through Oct. 18 to coincide with the fifth anniversary of Canada legalizing cannabis for adult use, on Oct. 17.
More than 100 people took part at the summit, where they heard panel presentations and networked with political staff.
Schilling delivered a keynote address.
He wants four key changes to make the sector more stable.
One change is to alter the way excise taxes are levied, because the flat-rate tax of $1 per gram is significantly higher in percentage terms than originally intended. The tax was meant to be approximately 10 per cent, because the expectation was that grams of cannabis would cost $10. With grams now selling for $4, the tax is often around 25 per cent. BIV has covered cannabis sector executives similarly arguing that this tax is unfair.
Another change desired is for Ottawa to kill the need for licensed producers to put stamps on products. The expensive stamp system is complex, because each province has a different stamp.
“We should be no longer sort of licking, or sticking, stamps onto products,” he said. “It should be digital ways to make sure that excise has been paid.”
A third key change Schilling wants is for Ottawa to eliminate its 2.3-per-cent fee that is tallied on corporate revenue and not profit.
“No good tax theory says that you should tax the top line income,” he said. “It should always be on profits. So this is an additional stealth tax that the industry is facing.”
Finally, Schilling wants Ottawa to increase the amount of THC (the active ingredient, Tetrahydrocannabinol) allowed in edibles to 100 milligrams from 10 milligrams because the current low limit is encouraging customers to go to illicit vendors.
Making the changes will make the industry stronger, he said, and that is in the interest of business, government and his own credit union.