Republican AGs take on major credit card providers over new gun store merchant code | Troutman pepper


Two dozen Republican attorneys general (AGs), led by Tennessee Attorney General Jonathan Skrmetti and Montana Attorney General Austin Knudsen, sent a letter to the CEOs of credit card giants Visa, American Express and Mastercard, warning them to halt plans that would add a new merchant category code for gun retailers. The International Organization for Standardization (ISO) recently voted to create the new Merchant Category Code for gun stores to use when processing credit and debit card transactions. The letter argues that the ISO vote was prompted by years of pressure “from ideologues and accomplished via a bid by the union-owned Amalgamated Bank.”

The AGs threatened legal action against the companies if they adopted their plans to implement the new category code. The letter further expressed concern that implementing a new sales code for gun dealers would infringe the constitutional rights of gun owners and potentially violate antitrust and consumer protection laws. The letter goes on to say that the new code will not protect public safety and violates “the constitutional right to purchase firearms” by unfairly designating law-abiding merchants and consumers.

However, supporters of the new code say it could flag mass shooters and gun traffickers. Additionally, proponents say the move is similar to suspicious activity reports (SARs) already required of financial institutions. The letter seeks to counter that analogy by pointing out that SARs are specifically required by law and were created by balancing public safety and privacy. Gun store sales are now categorized as general merchandise or sporting goods and the addition of the new merchant code would not specifically detail what the customer purchased. AG Republicans have argued that the new code will result in the collection of vague and misleading information. For example, the new code would not differentiate between buying a safe and a gun. The code also would not capture gun purchases made at department stores, resulting in arbitrary and disparate treatment of “gun store” merchants and consumers.

More importantly, according to the letter, tracking this information could lead to its misuse and “tracking this data only matters if [the credit card] the institutions plan to use this information to take other harmful actions, such as infringing on consumer privacy [and] inhibiting constitutionally protected purchases.

The letter also claimed that “[t]he new code for gun shops is the result of transnational collusion between large corporations leveraging their market power to promote the social outcomes desired by their owners. He further claims that activists have pressured the ISO to adopt the policy to circumvent and undermine the “American legislative process” and will have a chilling effect on the exercise of a constitutional right.

The AG Republicans who signed the letter concluded by noting their intent to use the full reach of their legal authority to “protect our citizens and consumers from unlawful attempts to infringe” on constitutional rights.

Credit card companies said they would continue to process legal purchases regardless of the new merchant code. This aligns with credit card policies like Visa’s that prohibit members of financial institutions from declining transactions based on merchant code.

The new traders’ code is caught in the crosshairs of a topic that has been a political flashpoint for years, often with strong and varied opinions on the subject. We will continue to monitor how large companies handle the potential use of the Merchant Code and the inevitable regulatory scrutiny and litigation that will arise from the implementation of the new Merchant Code.


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