Kentucky is the latest state to ban financial institutions from using a merchant category code on credit card transactions to track firearm sales, after HB357 took effect on July 15.
However, with gun safety activists pushing the plan in other states and the U.S. Congress, one Texas lawyer predicts the conflict will need to be reconciled in Washington.
At issue is a plan to use merchant category codes on credit cards to flag purchases at gun stores. A merchant category code is a four-digit number assigned to a business, based on its type. The codes are generally applied to broad categories, such as clothing or hardware. Guns have been listed as durable goods or outdoor sports equipment.
HB357, or the “Second Amendment Privacy Act,” was approved by the Kentucky House of Representatives by a 78–18 vote in February. The Senate concurred with a vote of 31–7 and Gov. Andy Beshear allowed the legislation to become law without his signature.
Sixteen states, including Texas, have now outlawed the practice. Most of those states have modeled their laws on legislation drafted by the National Shooting Sports Foundation.
Wisconsin would have joined those 16 states but Gov. Tony Evers vetoed SB 466 last May.
In a statement to the Legislature, Mr. Evers said he vetoed the measure because it was unclear and would violate the separation of powers called for in the Wisconsin state constitution.
Dallas-based Second Amendment attorney Richard Hayes helped write Texas HB 2837, or the “Second Amendment Financial Privacy Act,” which bans the practice. The law was approved on June 10 and goes into effect on Sept. 1.
The Texas law is a photographic negative of a law passed in Colorado. As with Colorado, Texas tasks the state’s attorney general with enforcement. The law also carries a fine of up to $10,000 for each violation.
However, unlike Colorado, Texas prohibits the codes rather than requires them. Texas also allows individuals to sue companies that try to track their purchases.
“We wrote this law to be extremely broad. We wrote it in a way that there’s no wiggle room,” Mr. Hayes told The Epoch Times.
Mr. Hayes said using merchant category codes is the scenario that gun rights activists have feared.
‘Showdown on the Federal Level’
Mr. Hayes says that New York, California, and Colorado have enacted laws mandating the practice.California Gov. Gavin Newsom’s office didn’t respond by publication time to requests by The Epoch Times for comment; however, in a September 2022 statement, the state’s Attorney General Rob Bonta said he welcomed the decision by American Express, Visa, and Mastercard to comply with California’s law.
“This decision by the three largest credit card companies in the U.S. will go a long way in helping us in our fight to save lives and combat senseless violence,” the statement reads.
Colorado Gov. Jared Polis signed SB 24-006 into law last May. The new law requires credit card companies to use the codes to track sales at gun stores. The attorney general will enforce the law, which carries a possible fine of up to $10,000 for each violation.
Robert Welsh, an associate attorney with the Mountain States Legal Foundation in Lakewood, Colorado, doubts that any gun registries would be built under the law. The nonprofit legal firm is dedicated to defending individual rights, according to its website.
“There’s no way, really, through these codes to determine what they purchased. There are federal regulations that prohibit registries,” Mr. Welsh told The Epoch Times.
However, Mr. Hayes said that division extends beyond the state legislatures. Four measures to prohibit the plan have been introduced in the U.S. House of Representatives and two in the U.S. Senate.
Mr. Hayes said that could create problems as credit card issuers, processors, banks, and other financial institutions attempt to follow contradictory and confusing laws from one state to the next. He said the matter will likely have to be settled in Congress or the U.S. Supreme Court.
“It’s due for a showdown on the federal level,” he said.
Proponents of the plan say that mass shooters—such as those in Orlando, Florida, in 2016; Aurora, Colorado, in 2012; and Las Vegas in 2017—racked up thousands of dollars on credit cards before carrying out their attacks. They argue that those shootings might have been prevented if banks had been required to report such credit card activity to law enforcement.
In 2022, Amalgamated Bank President and CEO Priscilla Sims Brown said that her bank had successfully petitioned the International Standardization Organization (ISO) for a code specific to firearms.
In a September 2022 online announcement, Ms. Brown heralded the new code.
“This action answers the call of millions of Americans who want safety from gun violence and we are proud to have led the broad coalition of advocates, shareholders, and elected officials that achieved this historic outcome,” the statement reads.
In media interviews and public statements, Ms. Brown noted that other, more innocuous businesses have codes. She said the possibility of preventing crimes committed with guns made any alleged impact on rights worthwhile.
The bank didn’t respond by publication time to requests by The Epoch Times for comment.
Second Amendment advocates decried the plan as an infringement on gun rights and a violation of the Fourth Amendment’s protection against unreasonable search and seizure.
“This creates a backdoor registry. [The government] is going to outsource this to private banks,” Mark Oliva, spokesman for the National Shooting Sports Foundation, told The Epoch Times. “It becomes a privacy concern when the government is violating your Fourth Amendment rights.”
Mr. Oliva said the problem is the lack of specificity. A duck hunter who buys one gun, some ammunition, clothing, decoys, boots, and other items for the upcoming season could be portrayed as hoarding guns and ammunition based solely on the amount spent.
“All of a sudden, the purchase looks like $5,000 to $7,000, but it’s not a true representation of what was purchased,” Mr. Oliva said.
In a September 2022 blog post, Visa criticized the plan.
“It would be an invasion of consumers’ privacy for banks and payment networks to know each of our most personal purchasing habits. Visa is firmly against this,” the blog post reads. “Visa provides our services to everyone, everywhere, so long as they are used for legal purchases. We believe that is the appropriate standard.”
Visa issued a statement the following March, saying the laws create confusion.
“These legislative actions disrupt the intent of global standards and create significant confusion and legal uncertainty,” Visa stated. “We have therefore decided to pause implementation of the MCC [merchant category code] at this time.”
Neither Visa nor Mastercard responded to requests by publication time for comment for this story.
