Three major American credit card companies announced earlier this month their intention to begin using a “merchant category code” (MCC) for gun stores.
If Visa, MasterCard, and American Express move forward with the plan, purchases made at gun shops will be marked with a code reflecting that merchant type and the amount spent. The International Standards Organization (ISO), a body that recommends codes for various purchases, created this new MCC.
Gun control groups, along with allies in banking and media, have been lobbying financial institutions for many years to assign gun stores a code that can be used to flag suspicious purchases. Gun rights groups, on the other hand, see this development as a ploy to harass gun owners and restrict Second Amendment rights without going through the U.S. Congress.
In this controversy’s latest development, 23 Republican state attorneys general sent a letter to Visa, MasterCard, and American Express urging them not to move forward with their plan. “Categorizing the constitutionally protected right to purchase firearms unfairly singles out law-abiding merchants and consumers alike,” the letter states.
Whether credit card companies will use the gun store MCC to flag suspicious purchases remains to be seen. However, this recent announcement has catapulted what was once a little-known agenda item into the national spotlight.
Credit card companies assign the MCCs developed by the ISO to a wide variety of stores, including clothing and grocery stores, gas stations, and restaurants. Usually, companies use these codes to track purchase behavior and facilitate rewards programs, Ted Rossman told MeatEater. Rossman is a Senior Industry Analyst at Bankrate, a consumer finance services company.
“The main reason these things exist is to put some order to the purchasing world,” he said.
He explained that in most cases, MCCs are assigned to an entire store rather than to a particular product. In its statement about this issue, Visa confirmed that MCCs do not communicate SKU-level data. In other words, even if someone purchases $5,000 worth of products from a gun store, credit card companies will not be able to see whether those products are guns, optics, lights, or magazines.
Sporting goods stores that sell guns along with other items like basketballs and hockey sticks probably won’t be given the “gun store” MCC. However, according to Mark Oliva of the National Shooting Sports Foundation (NSSF), credit card companies may still separate the gun counters within those stores and label them with the gun store code.
“It is going to affect the big box retailers,” he said. Pharmacies are labeled with a different code even when they reside within a grocery store. The same could happen at gun counters in stores like Cabela’s and Bass Pro Shops. “They’ll know that when someone goes into a big box retailer, they’ve spent money at that gun counter,” Oliva said.
Gun control advocates hope credit card companies will use the new MCC to flag and report suspicious behavior. New York Attorney General Letitia James said these companies must “commit to flagging suspicious gun sales that can help us stop mass shootings before they occur.”
Amalgamated Bank, which refuses to do business with gun companies, has led the campaign for the new MCC. CEO Priscilla Simms-Brown told CBS that the information could be used to develop algorithms that send Suspicious Activity Reports (SARs) to law enforcement.
Purchases of other items sometimes trigger SARs, but U.S. law requires these reports rather than the unilateral decisions of credit card companies. Simms-Brown still believes these companies should begin compiling those reports.
“Where there may be gun sales that are intended for black markets. Where we see patterns of gun purchases being made in multiple gun shops. We could provide that information to the authorities to investigate,” she said. “We have an obligation to address crime that is facilitated through our system. What price do you put on a life? If it stops two people from dying, isn’t it worth it?”
Politicians have also joined the movement. U.S. Senator Elizabeth Warren, along with 27 other members of Congress, sent a letter to credit card company executives urging them to adopt the new MCC. They called it a “first step” towards “countering the financing of terrorism efforts.”
To justify this strategy, many advocates point to three mass murders in which the perpetrators purchased firearms and ammunition with credit cards. The man who killed 12 people at a movie theater in Aurora, Colorado, in 2012 put $9,000 on credit cards the two months prior to the killings; the killer at the Pulse Nightclub in Orlando put $26,000 on credit cards; and the Las Vegas shooter purchased guns and ammo worth $94,000 with credit cards in the year leading up to the massacre.
If a credit card company notices a person making large purchases at gun shops in a small time frame, they could report that person to law enforcement. And according to gun control advocates, they could stop the next mass murder from taking place.
Gun rights proponents, on the other hand, argue that the plan fails on both constitutional and practical grounds. From a constitutional perspective, tracking gun purchases could chill Second Amendment rights.
For example, U.S. Congresswoman Elise Stefanik sent her letter to credit card companies calling the new MCC “an assault on the Second Amendment rights of law-abiding American citizens” and “a first step towards further infringing on law-abiding United States citizens utilizing their Constitutional right to bear arms.” She was joined in her letter by 100 other members of Congress.
The NSSF represents gun stores and manufacturers, and Oliva said their members are deeply concerned about this development. Some said they plan to re-install ATMs in their stores so that customers can purchase guns without worrying about ending up on a “watch list.”
“There are concerns from retailers that this is an invasion of privacy of their customers,” he said. “They’re going to be singled out simply for exercising their Second Amendment rights. That is worrisome when you have outside agencies doing the dirty work of the government to create a shadow watch list.”
Gun rights advocates also worry that this latest announcement represents another step towards unbanking gun stores and gun owners. The idea that the financial industry might be used to limit gun purchases has been around for many years, but Oliva pointed to a 2018 editorial in the New York Times by Andrew Ross Sorkin as the genesis of the modern push. “Sorkin had the notion that he could eventually apply enough pressure on credit card companies to deny your ability to purchase a gun with a credit card,” Oliva said.
There is precedent for this fear. Citigroup decided in 2018 that it would no longer do business with certain types of gun makers, PayPal does not allow the purchase of guns or “gun paraphernalia” on its app, and Bank of America no longer does business with companies that sell so-called “military-style rifles.”
Practically speaking, flagging large purchases made at gun stores presents its own challenges. Gun safes, frequently sold by standalone gun stores, can easily cost over $10,000. Optics can run $2,000 or $3,000 a piece, and cases of ammunition can cost several thousand dollars. It’s possible, in other words, to spend as much at a gun store as the mass murderers listed above without purchasing a firearm.
It remains unclear how credit card companies would differentiate between the vast majority of legal purchases made at gun stores and the small minority of those made with the intent to commit a crime.
“It’s junk data,” Oliva said. “This doesn’t help anybody. When we look at criminals, there are other flags that authorities have without looking at you and putting you in the same basket as people who are potentially going to commit an atrocity.”
Ted Rossman of Bankrate confirmed that MCCs could theoretically be used to flag suspicious gun purchases, but he said there are still many unknowns.
“It’s a theoretical possibility, but we don’t know how it’s going to work in the real world,” Rossman said.
When flagging fraudulent purchases of other items, “it’s murky what goes into this and where the line is drawn,” he said. Most credit card users have experienced either a false fraud alert (for something they purchased) or being forced to report a fraudulent purchase that the credit card company missed. At the end of the day, “no algorithm is perfect,” Rossman said.
Given that uncertainty, Visa, MasterCard, and American Express may not want to wade into those waters. All three companies stated that they cannot access individual item data and will continue to allow all lawful purchases.
“Our policy has been, and will remain, that our customers are able to make legal firearm purchases using our Cards,” said Brett Loper, Executive Vice President of Global Government Affairs for American Express.
MasterCard said that the company “appreciates the urgent need to reduce gun violence in the U.S.,” but that MCCs “were never intended to be utilized as a law enforcement tool.”
“We do not believe private companies should serve as moral arbiters,” Visa said in its statement. “Asking private companies to decide what legal products or services can or cannot be bought and from what store sets a dangerous precedent.”
Rossman confirmed that credit card companies have “trended towards not wanting to get involved,” but Oliva wondered why they agreed to use the gun store MCC in the first place.
“Companies could say, ‘We don’t think this is in the best interest of our customers.’ If companies stand up and say this is a bridge too far, then it ends right there,” he pointed out.
Even if credit card companies use the new MCC but refuse to flag gun-related purchases, they may still wind up in court. In a September 20th letter, 23 state attorneys general threatened legal action if these companies move forward.
“Be advised that we will marshal the full scope of our lawful authority to protect our citizens and consumers from unlawful attempts to undermine their constitutional rights,” they wrote. “Please keep that in mind as you consider whether to proceed with adopting and implementing this Merchant Category Code.”