House Republicans want to know how banks will respond to the creation of a new merchant category code (MCC) for gun and ammunition retailers, telling CEOs of the nation’s seven largest banks Wednesday they fear the new code gives financial firms the ability to infringe on Second Amendment rights.
The International Organization for Standardization (ISO) approved a new four-digit code for gun and ammunition sellers this month, the result of a three-year effort by Amalgamated Bank, Guns Down America and Giffords Law Center, which have argued the new code will help law enforcement identify suspicious gun purchases.
But Republicans say the categorization is an affront to consumer privacy and the rights of gun owners, and demanded the CEOs of the top banks outline their responses to the new code during a wide-ranging hearing Wednesday in front of the House Financial Services Committee.
“My Republican colleagues and I have expressed concerns that this will make it easier to track, expose and limit the constitutional rights of millions of law-abiding gun owners,” Rep. Roger Williams, R-TX, said during the hearing. “Progressives are already cheering that this will be a huge step forward in monitoring suspicious gun purchases.”
The problem with the new classification code, Williams argued, is the subjectivity of determining what is suspicious.
“Anyone who is against the rights of gun owners will want your institutions to flag every single transaction to a gun MCC to law enforcement,” he warned.
Referencing a statement issued last week by Visa, in which the payments giant said it was “firmly against” the code and “does not believe private companies should serve as moral arbiters,” Williams asked the CEOs if they shared the same sentiment.
“We don't set the merchant category codes. The ISO sets them and we're instructed to follow them,” Wells Fargo CEO Charlie Scharf said. “What we think is not really relevant at this point.”
Bank of America CEO Brian Moynihan and Truist CEO Bill Rogers said they plan to follow bank privacy policies, while JPMorgan Chase CEO Jamie Dimon said his bank doesn’t want to be in the business of telling people what they can do with their money.
Citi CEO Jane Fraser’s answer was more direct.
“We do not intend to limit the purchase of firearms by our individual cardholders as a result of the code,” she said.
The new code has riled Republicans who argue the implementation of the new MCC won’t prevent mass shootings and will likely be abused.
“[T]here is no fair or impartial way to determine from a transaction’s MCC whether a transaction is suspicious,” Rep. Patrick McHenry, R-NC, wrote to Amalgamated Bank CEO Priscilla Sims Brown on Monday. “The MCC indicates only that a purchase was made at a certain retailer, it does not provide data regarding what was purchased.”
McHenry, the ranking member on the House Financial Services Committee, accused Amalgamated of forcing a “divisive, progressive policy onto the entire American financial system.”
Amalgamated, which spearheaded the gun merchant code effort, appears poised to use the merchant code to report suspicious activity associated with guns.
In a statement this month, the bank called the code “the key to creating new tools that all financial institutions must now use to begin detecting and reporting suspicious activity associated with gun trafficking and mass shootings to the Financial Crimes Enforcement Network.”
Seeking more information on Amalgamated’s efforts to establish the MCC, McHenry’s letter includes a dozen questions ranging from the type of data the bank plans to collect, to which law enforcement agencies the bank plans to report the data.
In a statement to Banking Dive, Amalgamated said it welcomes the opportunity to answer the questions sent by the committee and provide information on the matter.
During Wednesday’s hearing, Rep. Alex Mooney, R-WV, asked Truist’s Rogers how his bank planned to flag suspicious purchases in light of the new MCC for gun and ammunition retailers.
Mooney said he singled out Rogers due to his bank’s large presence in West Virginia, where he claimed nearly 60% of residents own a firearm.
“This is a developing area at this particular time, our positions will follow the rules that are part of the system,” Rogers said. “We’ll also follow the law and protect the rights of our consumers in terms of reporting. I can’t speak to exactly what will be required in terms of reporting, but that won’t be something that we’ll do on a voluntary basis.”
But Rep. Madeleine Dean, D-PA — who co-authored a letter with Sen. Elizabeth Warren, D-MA, in support of the ISO’s creation of the code — noted banks already have practices in place for the detection of fraud and suspicious activity, and said flagging suspicious purchases related to guns should be no different.
“The Pulse nightclub shooter charged more than $26,000 in credit card charges on guns and ammunition in the 12 days ahead of his killing spree that killed 49 and wounded 53 others. His average spending prior to this was $1,500 a month. Would you consider that to be suspicious activity?” Dean asked the CEOs. “What responsibilities do you, the banks, have, and what conversations have you had around your boardrooms, to say, ‘How can we help slow the tragic loss of life due to gun violence?’”
Citi’s Fraser said her bank’s board engages in an “active dialogue” over what it can do to help prevent gun violence.