Major card networks Visa and Mastercard may have gone quiet on the topic of the gun merchant category code, but state legislators across the country have been busy taking sides on it.
The language in the state laws varies, but they generally ban financial institutions from requiring a specific code be applied to firearms merchants, according to the National Rifle Association’s Institute for Legislative Action. Other states that have passed such laws include North Dakota, West Virginia, Mississippi and Idaho.
The law in Texas, for example, gives the attorney general power to investigate financial institutions suspected of violating the gun MCC prohibition, while West Virginia enables consumers and merchants to take civil action, the NRA ILA said in a July post on the issue.
“Collecting firearm retailer financial transaction data amounts to surveillance and registration of law-abiding gun owners,” the NRA ILA post said. “Federal law contains multiple restrictions on the creation of a national firearms registry and the creation of this MCC should be perceived as an attempt to circumvent those restrictions.”
Meanwhile, California Gov. Gavin Newsom signed a bill into law Sept. 26 that requires use of the gun MCC. The new California law, AB 1587, requires banks and credit card companies to implement in California the merchant category code assigned to gun and ammunition retailers.
The law takes effect Jan. 1, 2024, although card networks have until July 1 to make the gun MCC available for merchant acquirers, and merchant acquirers have until May 1, 2025 to assign the MCC to a gun retailer, according to the state’s legislative website.
“Financial institutions can now be our partners in ending gun deaths since they are in a unique position to flag buying patterns that no one else can,” California Assemblymember Phil Ting said in a news release.
States take varying approaches to gun merchant code
As state attorneys general on both sides of the aisle have called out the card network companies over the code, it’s become a politically fraught issue for payments players. The card networks, including American Express and Discover Financial Services, all backed off implementation of the gun MCC in March, with some citing state legislation taking aim at use of the code.
All four card companies either declined to comment or didn’t immediately respond to requests for comment on the status of gun code implementation or state legislative efforts.
In some cases, state legislators have been spurred to action by interest groups. The anti-gun violence organization Brady approached Ting with the idea for the bill in California, Ting said in June.
The card networks cited legislation in certain states as an implementation obstacle, but the pause was national in scope, which was “disappointing,” said Joshua Scharff, general counsel and director of policy at Brady.
Scharff hopes California enacting a law to require the code’s use makes it “easier for the credit card companies and the merchant acquiring banks to implement it in states where there’s no legislation in either direction.”
On the other side, the trade association National Shooting Sports Foundation approached state lawmakers after ISO approved the code early this year, said Mark Oliva, managing director of public affairs at the NSSF. The trade group broached the idea of legislation to bar use of the code.
Given California’s move, the warring state approaches are setting the stage for the introduction of legislation at the national level, Oliva contends. The NSSF has approached Republicans in Congress and looked at draft legislation with them, he said.
“We do anticipate that there will be a proposal in Congress to address this issue,” Oliva said, although he wouldn’t speculate as to when that might land. “It would look very similar to what you've seen in some of these other states.”
From the card companies’ perspective, harmonization, rather than a patchwork approach, would be less complicated and more efficient, said Daniel Kinderman, associate professor of comparative politics and international relations at the University of Delaware. But they’re likely to remain mum on the topic, at least publicly.
“My overall sense is that business is going to try to stay out of the crossfire, so to speak,” Kinderman said. That said, if the card networks can quietly voice some technical concerns rather than taking a position, he expects they’ll do so. “If it ends up being quite costly, we could hear something” from the card companies, he said.