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January 8, 2014

Cards going to pot in US state of Colorado

Controversy has erupted in the US state of Colorado over the use of cards to buy marijuana, now legal for recreational use under state law.

By Ellie Chambers

Controversy has erupted in the US state of Colorado over the use of cards to buy marijuana, now legal for recreational use under state law.

Visa, MasterCard and American Express all have official rules banning the use of their cards for such purposes, but some merchants are allowing customers to use the cards anyway.

In a statement, Visa wrote: "In offering our payment services, Visa adheres to the rule of law and seeks to prevent our network from being used for unlawful purposes."

However, the statement then went on to say that Visa will follow the lead of the federal government by not seeking to challenge state law, despite the illegality of buying marijuana under federal law.

Visa wrote: "In this instance, the federal government considers the sale of marijuana illegal but has announced that it will not challenge state laws that legalize and regulate marijuana sales.

"Given the federal government’s position and recognizing this is an evolving legal matter with different standards applicable in different states, our local merchant acquirers are best suited to make any determination about potential illegality."

MasterCard took a less ambiguous stance, saying that marijuana purchases are still considered illegal and that it will work with merchant processors if purchases do take place.

American Express took a tougher stance yet, blocking transactions from a payment provider that advertised its ability to set marijuana merchants up so they could accept all major credit and debit cards.

"We monitor websites to help make sure that the policy is being enforced," an AmEx spokesman said.

However, it is thought that some dispensaries are circumventing the major card networks by logging marijuana purchases as other products – a serious violation of card-industry rules – or using card processing systems sold by specialist companies.

Square has also weighed in to the debate, saying that it will not allow process payments at Colorado’s marijuana dispensaries.

A spokesman said: "It’s a violation of our terms of service to accept payments with Square for any illegal goods or activities, whether prohibited by federal or state law."

 

Related articles:

American Express to pay $75m to settle class action litigations

Target probing potential credit, debit card data breach

US judge approves settlement between merchants and MasterCard

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