On July 1, new laws will take effect in Tennessee and Georgia that Republican legislators say will prevent banks and credit card companies from tracking firearm purchases.
At least 15 states — all but one of them Republican-led — have passed similar laws in the past two years, barring financial institutions from using a merchant category code to identify transactions at gun stores.
The push for banning the code comes as Republicans seek to rally their base ahead of the 2024 election. GOP lawmakers have promoted the laws as a necessary defense against gun registries and government spying. But banking experts say those fears are ungrounded, as credit card companies don’t need a code to amass personal information about their customers.
“If you look at your credit card statement or even just pay attention to the ads you get online, clearly a lot of this information about where you shop and how much you spend has already been gathered,” said Dru Stevenson, South Texas College of Law professor who has written about the intersection between firearms law and the banking industry. “It is completely political theater to oppose the use of this new code.”
For decades, financial institutions have employed merchant codes to categorize many types of business, from bakeries and florists to candy stores and boat dealers. The codes facilitate tax reporting and enable certain promotional card benefits, according to a manual from Citibank. Often, banks and credit card companies use the codes to detect signs of criminal activity, which they monitor to assist in law enforcement investigations and to insulate themselves from liability.
The new code for gun stores was aimed at violence prevention: In several of the highest profile mass shootings of the last decade — San Bernardino, Orlando, Las Vegas — shooters ran up tens of thousands of dollars in loans and credit card debt buying guns and ammunition in the weeks before their attacks.
To spot potential shooters before they act, financial institutions began developing risk profiles based on people’s spending across businesses for which merchant codes already existed, according to internal banking documents made public in March by the U.S. House Judiciary Committee. At least one bank proposed examining transactions at pawn shops and sporting goods stores to approximate gun buying, along with spending on services like medical bills or life insurance that might signal someone is under duress.
Gun violence prevention advocates saw an opportunity to streamline this process by instituting a specific code for firearm retailers.
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In 2022, Amalgamated Bank, a progressive, union-owned institution that focuses on socially responsible banking, petitioned the body that designates merchant codes — the International Standards Organization — to establish a new code for gun shops. The move was supported by the gun violence prevention groups Guns Down America and Giffords. The ISO approved the petition in the fall of that year.
Reaction from the right was swift. After major credit card companies began using the new code, 12 U.S. senators and 24 attorneys general decried their decision to choose “the side of gun control advocates over the privacy and Second Amendment rights” of Americans. By the end of 2023, West Virginia, Florida, Texas, North Dakota, Mississippi, and Idaho had passed laws banning the new code.
Banking experts say the new code would not enable a breach of privacy.
Credit card companies already receive the names of businesses involved with each transaction. If companies were interested in tracking individual purchases at gun stores, the Bureau of Alcohol, Tobacco, Firearms and Explosives publishes a list of the business and license names of every federally licensed gun shop in the country, readily available for cross reference.
“The codes are not even the most granular information that the credit card companies have about merchants,” said Hudson Muñoz, former director of public relations at Amalgamated Bank, who is now the executive director of the violence prevention group Guns Down America. “But they help create efficiency in the system when trying to identify abrupt changes in broader purchasing patterns.”
The gun industry’s trade group, the National Shooting Sports Foundation, has issued press releases touting its work to draft and shepherd several of the anti-merchant-code bills through state legislatures. The Trace reviewed the bills introduced in all 15 states and found text duplicated verbatim and several identical bill titles.
The NSSF did not respond to requests for comment
Jacob Neiheisel, a political strategy researcher at the University of Buffalo, said lobbying groups often advocate politically charged legislation that addresses unlikely threats to constituents’ freedoms because such bills are easy to pass and promote. “Bills like this are easy wins for groups like NSSF, who can go back to the companies on whose behalf they work and say, ‘Hey, we did this,’” he said. “It’s a win-win across the board.”
Meanwhile, other states have passed laws to enforce the use of the code. In February, Visa, Mastercard, and American Express announced their intent to comply with a California law, signed by Democratic Governor Gavin Newsom, requiring use of the new code by May 2025. New York legislators approved a code requirement of their own in June.
“Banks should be able to use the same process for monitoring risk at any type of retailer in New York,” said New York State Senator Zellnor Myrie, who authored his state’s legislation. “This bill enables banks to use the same data processes with gun store transactions that they already use at every other type of merchant.”
New York’s bill had yet to be signed by Democratic Governor Kathy Hochul as of June 28.
