Underwriters Shouldn't Be Reading Lab Reports
Underwriters Shouldn't Be Reading Lab Reports The Manual COA Problem Is Becoming One of the Biggest Compliance Gaps in Regulated Payment...
| "Regulatory change doesn't create risk. Being unprepared for regulatory change does." |
Introduction
November is quickly approaching, and for the hemp industry, it may represent one of the most significant regulatory events since the passage of the 2018 Farm Bill.
For banks, payment processors, sponsor banks, ISOs, and merchant risk teams, the upcoming changes associated with Section 781 are much more than a regulatory update. They have the potential to fundamentally change which hemp-derived products can legally be sold in the United States and, consequently, which merchants may continue to fit within their risk and compliance programs.
The organizations that begin preparing now will have the opportunity to proactively protect their merchant portfolios, support their merchants through transition, and minimize operational and regulatory disruption.
Those that wait may find themselves scrambling to identify affected merchants after the legislation takes effect.
The question is no longer whether financial institutions should be paying attention.
The question is whether they understand exactly what they have in their portfolios today.
Section 781 of the federal appropriations legislation significantly narrows the federal definition of hemp by moving away from the familiar "less than 0.3% Delta-9 THC by dry weight" standard established by the 2018 Farm Bill. The legislation introduces a broader "total THC" framework and specifically targets intoxicating hemp-derived cannabinoid products that have proliferated throughout the market over the last several years.
While the hemp industry continues to pursue legislative and legal remedies, organizations should assume that regulatory changes may take effect in November and prepare accordingly. Several hemp industry groups are actively advocating for alternative regulatory frameworks, but significant uncertainty remains regarding the final outcome.
Although the final regulatory landscape continues to evolve, the legislation is expected to impact numerous hemp-derived cannabinoid products currently sold throughout the United States, including:
Depending upon the ultimate interpretation and implementation of the legislation, even some full-spectrum CBD products may be affected if they do not meet the new federal requirements.
This is not simply a hemp industry issue.
This is a merchant portfolio issue.
Most payment providers significantly underestimate how many merchants may be selling impacted products.
The list extends well beyond traditional CBD merchants.
Potentially impacted merchant categories include:
Many financial institutions may not even realize these products exist within their portfolios today.
That is perhaps the greatest risk of all.
Let's consider a simple example.
Imagine a payment processor with:
How many are currently selling:
The answer for many organizations is:
We don't know.
That lack of visibility creates significant operational and compliance challenges.
The consequences extend far beyond simply losing a merchant account.
Potential impacts include:
Regulatory Risk
Operational Risk
Financial Risk
Reputational Risk
Merchant Experience Risk
Regulatory change has a way of exposing legacy compliance processes.
Organizations that depend upon spreadsheets and manual reviews will quickly discover how difficult it is to audit thousands of merchants and millions of products in a short period of time.
The good news is that there is still time to prepare.
Every bank, payment processor, and sponsor bank should immediately begin asking the following questions.
Organizations that begin these exercises today will significantly reduce future operational disruption.
The hemp industry has evolved faster than traditional merchant compliance programs were ever designed to manage.
A modern hemp merchant may have:
Traditional merchant underwriting was designed to understand businesses.
The upcoming hemp legislation highlights why product intelligence has become equally important.
You cannot manage what you cannot see.
For years, our team has been preparing for precisely this type of regulatory event.
One of the core design principles behind Qredible has always been simple:
Regulatory change is inevitable. Continuous Merchant Intelligence™ should make organizations ready for it.
Long before Section 781 became today's headline, we recognized that payment providers needed the ability to continuously understand:
This philosophy ultimately led us to build automated merchant portfolio auditing capabilities that can identify specific products and merchants potentially impacted by regulatory changes.
Rather than spending months manually reviewing portfolios, financial institutions should be able to quickly answer questions such as:
Regulatory change should not require panic.
It should simply require intelligence.
Whether the hemp industry ultimately experiences prohibition, regulation, or some modified legislative framework, one thing has become abundantly clear:
The future of merchant compliance is continuous.
The organizations that succeed over the next decade will not necessarily be those with the largest compliance teams.
They will be the organizations that possess the best merchant intelligence.
Section 781 may simply be the first major regulatory event that demonstrates why continuous merchant intelligence is no longer a luxury—it is becoming an operational necessity.
As November approaches, ask yourself:
► Do we know which hemp-derived products exist within our portfolio today?
► How quickly could we audit every merchant selling hemp products?
► What is our remediation strategy?
► Have our sponsor bank requirements been updated?
► Are our compliance programs designed for continuous regulatory change?
► If Congress passed similar legislation tomorrow affecting another industry, could we respond quickly?
Because regulatory change isn't slowing down.
Commerce isn't slowing down.
The organizations that thrive will be those that can continuously understand both.
The hemp industry isn't disappearing. It is evolving. The question facing financial institutions isn't whether change is coming. It's whether they will be ready when it arrives.
This is exactly why Merchant Intelligence™ exists. www.qredible.com
Qredible is redefining merchant underwriting through Merchant Risk Intelligence (MRI)—a product-first approach that continuously analyzes what businesses sell, how they market those products, and the evidence required to support compliant payment acceptance. By moving beyond static industry classifications, Qredible helps banks, payment processors, ISOs, and sponsor banks make faster, more informed, and more defensible underwriting decisions while reducing manual effort and strengthening ongoing portfolio oversight. Learn more about Qredible's product-first automated compliance management platform for regulated industries →
