Merchant Category Codes—The Next Second Amendment Battlefield

The fight over new Merchant Category Codes (“MCC”) specific to firearms businesses has been in the headlines quite a bit over the last few months.  This Common Sense Paper will explain the issues surrounding MCCs and put these issues in the context of the broader fight for Second Amendment rights.

What is a Merchant Category Code?

A Merchant Category Code (MCC) is a four-digit code assigned by credit card issuers to every business that accepts credit cards in order to classify the type of purchase made at that business.  Usually, an MCC is a boring behind-the-scenes piece of data that allows issuers to determine the type of processing fees the business will pay, and the type and amount of rewards the issuer will pay to the cardholder.  These codes are issued by two groups, the International Organization for Standardization (ISO) and the Standard Industrial Classification (SIC), and credit card networks then decide which codes to use and apply to merchants within their networks.

Ordinarily, the process of creating and selecting MCCs is a boring and bureaucratic one, and businesses don’t usually notice which particular code they’ve been assigned by a credit card network.  But unfortunately, the ISO was bullied into creating an MCC specific to firearms retailers by Amalgamated Bank, a bank intentionally taken over by left-wing ideologues for the purposes of pushing their political agenda in the finance industry.  Amalgamated Bank states that its goal with the new MCC is to “create[e] 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, the government agency charged with safeguarding the financial system from illicit use.”  Second Amendment advocates rightly interpret this assertion as the first step in an attempt by anti-gun activists to create a firearm registry through the banking system, since they’ve been unable to convince Congress that such a registry is worthwhile.

Why is this important to Second Amendment Advocates?

Firearm registries have been a major concern for Second Amendment advocates for several decades, and for good reason.  American gun owners are acutely aware of the recent history of firearm confiscation in Great Britain, Australia, New Zealand, and Canada.  Those confiscation efforts, which began in the 1990s in Great Britain and continued through to ongoing efforts in Canada that began in 2020, share one common thread: they were possible only because these governments had previously required their citizens to register all firearms.  Without a registry, law enforcement has no way of knowing where newly prohibited items are stored or who owns them, making confiscation a practical (and therefore political) impossibility.  With this fact in mind, Second Amendment advocates prevailed upon Congress to pass laws in 1986 (the Firearms Owners Protection Act) and 1993 (the Brady Handgun Violence Prevention Act) that expressly prohibited the creation of any firearm registry in the United States.

But those dual statutory prohibitions have not stopped anti-gun advocates from continuing to work towards bans and confiscation of firearms.  Instead of seeing these federal prohibitions as the end of the road for their efforts, in recent years, they have begun focusing their efforts on leveraging private businesses to enact the policies that failed to get traction in Congress.  The creation of the new MCC is just one instance of the anti-gun left taking this route and trying to bully private entities into enforcing policies that the public, through its elected representatives, declines to enact.

What’s Next

The creation of this new MCC for firearms retailers was met with a swift backlash from the Second Amendment community, many members of the financial industry (including Visa itself), and elected officials in seven states, which have already banned the use of this new code (as of this paper’s publication, nine more states are considering a ban of their own).  On the other hand, California recently enacted a law that will require the use of this code in that state, beginning in 2025.  As such, the fight will continue for the foreseeable future.