The Great Merchant Code 2A Gun Control War

What 2 years ago wasn't even a major conversation in the ongoing Gun Control debate has now turned into an outright war with about 20 states attempting to pass or having passed legislation in what I'm calling the Great Merchant Gun Code War.

Some Background

Merchant processors and credit card companies have merchant category codes (MCC). These codes serve to help these financial institutions monetize their data. More about that in a moment.

To ensure some industry uniformity a 3rd party organization known as the ISO (International Organization for Standardization) maintains and approves the official list of MCCs. In September of 2023, the ISO approved an MCC for firearm retailers.

I've had my fair share of merchant accounts over the years and as of this writing our own company, ConcealedCarry.com has 3 merchant accounts. These accounts allow us to offer credit cards as a payment option when placing orders on this website.

When we apply for a merchant account, among other things we are asked to self-identify a MCC that most closely matches our products and services. For our company, and traditionally for anyone in the firearm industry the most common MCC to select is either “Sporting Goods” or “Miscellaneous Retail.”

academy sports PLACA

Why Financial Institutions Care About MCCs

What I think most of the public don't understand and frankly don't care about is the amount of money financial institutions make by internally monetizing their transactional data and by selling that data to 3rd parties.

Transactional data has been for the last 15+ years the gold mine of advertising and marketing. Consider for example if you want to advertise noise-cancelling headphones then one of your key target audiences is people who fly a lot on airplanes.

Well of course you can buy advertising in airports but beyond that how do you target your key audience? You buy data from the financial institutions.

CapitalOne, Citibank, Visa, Discover, and Chase know who travels a lot. Their transactional data makes it quite clear. So they make money by selling that data to large advertising data hubs, providers, and networks. This is one of the reasons you seem to see such relevant and targeted advertising online.

That is the key objective of having MCCs to begin with.

Why Would Our Government Want a Firearm Retailer MCC?

What possible excuse could our government have for asking financial institutions to identify transactions related to firearm purchases? No legitimate reason I assure you.

The excuse being given is that the data could help identify someone who is at risk of committing a violent crime. Yep, you heard me right.

The Amalgamated Bank, who pressured the ISO to create the new MCC has noted that they intend to create an algorithm “to report suspicious activity and illegal gun sales to authorities.”

The New York Times expanded on the scheme when they explained: “Banks could then either allow [the flagged] transactions, or block them and file suspicious activity reports with the Treasury Department’s Financial Crimes Enforcement Network, which would ideally also create a system to quickly forward that information to local law enforcement and the F.B.I.”

Your government, which we all know can't be trusted with darn near anything, let alone your transactional data, thinks that by monitoring your purchase behavior relating to gun stores they can identify those who pose a risk to society.

Furthermore, they think they can effectively militarize financial institutions to build the algorithms and models to identify those consumers and report them to law enforcement for investigation.

Before I expand on all the reasons why that is completely NUTS, dangerous, and blatantly unconstitutional let me tell you a little bit more about the war currently happening at the state level.

The Legislative War Happening Now

In 2023, we saw the following states pass laws prohibiting or discouraging the use of the firearm retailer MCC: Florida (SB 214), Idaho (HB 295), Mississippi (HB 1110), Montana (SB 359), North Dakota (HB 1487), Texas (HB 2837), West Virginia (HB 2004).

These laws tend at the very least to prevent merchant providers from forcing firearm retailers to use the new MCC and often impose penalties or potential liability to financial institutions who use or abuse the new MCC.

This year you can find similar protection (pro-gun rights) bills being debated in Georgia (HB 1018), Kentucky (HB 357), Indiana (HB 1084), Iowa (HF 2464), New Hampshire (HB 1186), Ohio (SB 148), Tennessee (HB 2762), Utah (HB 406), Wisconsin (SB 466), and Wyoming (SF 105).

There may be others that I didn't identify in my research.

Now that might sound like all good news. After all, if so many states pass laws prohibiting or restricting or at least discouraging the use of the new MCC then financial institutions have more incentive to not use it than to use it.

On March 9th, 2023 American Express, Mastercard, and Visa announced they had “paused implementation of the new code” due to the upcoming state legislation in many states restricting the use of the MCC.

However, consider bills now passed and about to be passed in California and Colorado.

On Sept 26th, 2023 California Governor Newsom signed into law Assembly Bill 1587 which requires that credit card issuers use specified MCCs to designate firearm and ammunition retailers.

In Feb 2024 Colorado's senate passed SB 24-066 which would require the use of merchant category codes by payment processors to identify firearms, firearm accessories, and ammunition purchases. That bill is progressing through the state legislature at this time and is likely to be passed.

This will prevent a merchant processor or financial institution from ignoring or not implementing the MCC entirely since some states (at least 1 at the time of this writing) require its use.

Image Courtesy of the Sacramento Bee. Gavin Newsom signs Assembly Bill 1587

The Dangers Behind the MCC War

Gun Owner Database / Registration

If financial institutions can push a few keys on a computer and quickly identify customers who have made purchases from a firearm retailer I would say that is the same as having and maintaining a database of gun owners.

Gun Owner registration or lists are such a threat to our freedom that the federal government passed a law strictly prohibiting any such list or database.

“No such rule or regulation prescribed [by the Attorney General] after the date of the enactment of the Firearms Owners Protection Act may require that records required to be maintained under this chapter or any portion of the contents of such records, be recorded at or transferred to a facility owned, managed, or controlled by the United States or any State or any political subdivision thereof, nor that any system of registration of firearms, firearms owners, or firearms transactions or disposition be established. Nothing in this section expands or restricts the Secretary's authority to inquire into the disposition of any firearm in the course of a criminal investigation.” [Emphasis added]

Under no circumstances should any American who cares about maintaining our freedom allow private financial institutions to have quick access to a list of gun owners.

Inaccurate Data

I'm also confused about false positives. Let's imagine for a minute that you really like to golf. So you go to your local sporting goods store to buy golf clubs and golf accessories on a regular basis.

Well, if that sporting goods store also has a FFL and sells guns then your golf purchases might flag you as a danger to society. While the retailer has the data of what you buy; your credit card company only sees what kind of store you are shopping at.

Are you thinking that the retailer could just set up multiple merchant accounts for different transactions? I doubt that any retailer would. That would be a massive pain in the neck. Certainly, nobody is currently suggesting they do but even if they did that would mean you have to pay for the gun at the gun counter but you can pay for the golf clubs at the main checkout. What about when I buy stuff on Amazon? If I add some gun-cleaning lube and some carpet cleaner to my Amazon cart and checkout what merchant code will it use? Do you trust Amazon to set up multiple merchant accounts and then properly identify which products should force which payment gateway to run the transaction?

Who Decides What Pattern is Dangerous?

Do you really trust Visa or local law enforcement to identify people who are a danger to society based on their transaction data? I'm honestly asking who is going to be in charge of making the rules that will raise the flag.

I buy a lot of guns. Further, I buy a lot of gun stuff from stores and companies that sell guns. Whatever rules are set it's hard for me to imagine that I wouldn't get flagged.

Does a person have to make 3 transactions to be investigated? 5 Transactions? Spend over $1500?

Law enforcement is going to have their hands full come fall hunting season when thousands of Americans drop several thousand dollars at their local sporting goods stores.

Too Easy to Ignore

Well if you live in California or Colorado might I suggest that moving forward you just withdraw cash from the ATM before you go to your favorite gun store to make a purchase? Or write a check if that is an option.

Gun control advocates don't care how impossible it may be to enforce their horrible schemes and I for one am happy to keep myself off their transactional radar by using cash moving forward.

Abuse Will Happen

We saw firsthand the danger that can come from this kind of thing. After the Jan 6th “Capital drama” in DC the FBI utilized transactional data from a handful of cooperating financial institutions to identify people who MIGHT have traveled to DC and purchased guns. They did that without obtaining a court order or any sort of due process.

We see the ATF abuse its power every day. I can't imagine what will come from making this kind of data available to law enforcement in America.

In Terms of Enforcement, This is Impractical

Those anti-gun lawmakers who know absolutely nothing about firearms or the community and culture of gun ownership are going to be in for a surprise when they learn that their scheme is ultimately impractical.

The number of false flags that will be raised from perfectly innocent transactions is going to flood law enforcement to the degree of making it impossible to follow up on any lead in the end.

Of course, perhaps they won't care. Perhaps the ultimate objective isn't to identify potentially violent people but actually to just backdoor a method of building a list of gun owners. In that case, this scheme has potential.

I live in Colorado and find this proposal dangerous and unconstitutional. Keep track of where your state stands on this issue and if I might be so bold… start using cash where possible.

 

About Jacob Paulsen

Jacob S. Paulsen is the President of ConcealedCarry.com. ConcealedCarry.com provides in-person and online firearm training for American gun owners. The Company is currently teaching in-person classes in 25+ states with a team of more than 55 instructors. Jacob is a NRA certified instructor & Range Safety Officer, USCCA certified instructor and training counselor, Utah BCI instructor, Affiliate instructor for Next Level Training, Graduate and certified instructor for The Law of Self Defense, and a Glock and Sig Sauer Certified Armorer. He resides in the Rocky Mountains of Colorado with his wife and children.

3 Comments

  1. Samuel Wayne Stephens on March 18, 2024 at 4:48 pm

    It’s too bad these Anti-Constitutional Nimrods cannot be held accountable for their bad legislation. If I write something offensive I am held accountable, if Democrat politicians write something offensive and unconstitutional, they are rewarded with the bad legislation being signed into law by a reprobate evil governor.

  2. Scott McCorvie on March 18, 2024 at 10:09 pm

    Thank you Jacob your research and excellent article!

  3. Edward Lind on March 19, 2024 at 1:02 pm

    For those who don’t know, it’s 18 USC 922 the prevents setting up a registry. California is trying to pass SB1160, which is a registration of all firearms in the state and an annual fee, like your driver’s license… The state senator who authored the bill says “it doesn’t violate 18 USC 922…” Seems like a clear violation to me…

Leave a Comment