California is Preparing to Track Gun Shop Credit Card Sales, While 17 Other States Enact Legislation Against It

Beginning Monday, a California law will mandate credit card networks such as Visa and Mastercard to supply banks with specific retail numbers that gun retailers can use to track transactions.

However, new rules in Georgia, Iowa, Tennessee, and Wyoming will have the opposite effect by prohibiting the use of specific gun store codes.

The differing legislation highlight what has quietly emerged as one of the nation’s most recent gun control fights, dividing state legislatures along predictable partisan lines.

Some Democratic lawmakers and gun control activists hope the new retail monitoring code could assist banking institutions in flagging suspect gun-related sales for law enforcement, potentially preventing mass shootings and other crimes. Lawmakers in Colorado and New York have followed California’s example.

“The merchant category code is the first sign that the financial system has had enough! “We’re putting our foot down,” said Hudson Munoz, executive director of the nonprofit advocacy organization Guns Down America. “You cannot use our system to facilitate gun crimes.'”

However, many Republican politicians and gun-rights supporters are concerned that the retail code may lead to unjustified suspicion of law-abiding gun customers. Over the last 16 months, 17 states led by Republicans have approved legislation outlawing or restricting the use of a weapons store code.

“We view this as a first step by gun-control supporters to restrict lawful commerce in firearms,” said Lawrence Keane, senior vice president of the National Shooting Sports Foundation, an industry group that supports laws prohibiting the use of the tracking code.

The new rules exacerbate the vast national split on gun control. This Monday, US Surgeon General Vivek Murthy called gun violence a public health problem, noting an increase in firearm-related deaths, including more than 48,000 in 2022. The National Rifle Association swiftly denounced the measure.

Other gun policies have led to states digging opposite trenches. On July 4, Republican-controlled Louisiana will become the 29th state to allow residents to carry concealed firearms without a permit.

In contrast, Democratic-led New Mexico tightened regulations this year for persons without concealed-carry permits, requiring a seven-day waiting period for gun transactions, which is more than double the three-day requirement for a federal background check.

States have also reacted differently to recent mass shootings. In Maine, where an Army reservist killed 18 people and injured 13 others, the Democratic-led Legislature passed a slew of new gun laws. Following school shootings in Iowa and Tennessee, Republican-controlled legislatures took moves to allow more qualified instructors to bring firearms into classrooms.

The recent spike in laws targeting guns store category codes focuses on a hidden component of computerized banking transactions. The International Organization for Standardization, headquartered in Geneva, develops thousands of voluntary standards in a variety of sectors, including category codes for a wide range of businesses, from bakeries to boat dealerships to bookstores.

Credit card networks give these category lists to banks, who assign specific codes to the firms whose accounts they handle. Some credit card companies use category codes to track client reward points.

Financial institutions can utilize the codes to help identify fraud, money laundering, or strange purchase patterns that have been flagged as suspicious to the US Treasury Department’s Financial Crimes Enforcement Network.

In 2022, banks and other depository institutions filed over 1.8 million secret reports, which identified over 5.1 million suspicious activity. According to the Bank Policy Institute, a trade group representing large banks, approximately 4% of annual reports are followed up on by law enforcement, with an even less number leading to prosecution.

Gun stores were historically grouped with other businesses under merchant category codes. Some have been classified as sporting goods stores, while others are miscellaneous and specialty retail shops.

In 2022, the International Organization for Standardization created a new four-digit category number for gun and ammunition shops at the request of New York-based Amalgamated Bank, which collaborated with gun-control organizations. Major credit card companies initially stated that they would adopt it, but then backed off due to pressure from conservative lawmakers and the gun industry.

Munoz, who helped lead the push to create the gun store code, stated that credit cards were used to purchase weapons and ammo in some of the country’s deadliest mass shootings.

The goal of a gun merchant code is to detect suspicious trends, such as a person with no history of gun purchases who suddenly spends big sums at many gun retailers in a short period. Banks might inform authorities, potentially preventing a mass shooting, Munoz said.

California’s new law mandates credit card networks to provide the weapons code to banks and other financial institutions by Monday. Those businesses will then have several months to assess which of their business clients should be classified as gun dealers and award them new numbers before May 1.

Visa, the nation’s largest payment network, recently revised its merchant data manual to include the guns code in accordance with California law.

This year, Democratic-led legislators in Colorado and New York passed guns code regulations that will take effect in May, the same time California does.

“If someone suspiciously purchased a large number of firearms, it would be very difficult to tell right now,” said California state Assemblymember Phil Ting, a Democrat who sponsored the proposed legislation. “You couldn’t tell if they were soccer balls or golf balls or basketballs.”

Even with a guns store code, it will be impossible to determine whether a specific sale is for a rifle, a storage safe, or another goods such as hunting apparel.

State laws forbidding gun store codes have various effective dates, but most allow state attorneys general to seek court injunctions against financial institutions that use the codes, with potential fines in the hundreds of dollars.

Dan Eldridge, proprietor of Maxon Shooter’s Supplies in suburban Chicago, believes that the merchant code will encourage more individuals to buy weapons with cash rather than credit in order to preserve their privacy. Though his firm has yet to be reclassified, Eldridge stated that he has already installed an ATM in his store.

“Viewed most benignly, this code is an effort to stigmatize gun owners,” says Eldridge. “But a more worrisome concern is that this is another private sector end run around the prohibition against the federal government creating a gun registry.”

Iowa state Sen. Jason Schultz, a Republican sponsor of legislation to repeal the firearms code, expressed concern that federal agents could obtain data on gun store purchases from financial institutions and use it as justification to raid gun owners’ homes and violate their Second Amendment rights.

“States are going to have to make a choice,” he told me, “whether they want to follow California or whether they’d like to support the original intent of the U.S. Constitution.”

Source: ABC7