Visa Inc., Mastercard Inc. and American Express Co. will add a new merchant category for firearms retailers, a victory for gun-control advocates who have pressed the financial industry to do more to help curb mass shootings.
The new merchant-category code was recently approved by an international entity that sets standards for the payments industry.
Merchant-category codes, or MCCs, are four-digit numbers that networks use to identify types of merchants by the goods and services they sell. Card networks assign specific codes to many kinds of specialty merchants, such as fast-food restaurants, bars and bicycle shops.
Until now, gun shops were often categorized as specialty retailers or durable-goods sellers—categories that include a much broader collection of companies.
The new code is for retailers whose primary business is firearms sales; big-box retailers that sell guns have different MCCs.
Card networks and banks have been discussing ways to monitor gun sales off and on for years. But gun-rights advocates have long resisted such efforts, saying they could unfairly prevent legal gun purchases.
It isn’t clear if or how information gleaned from the new code would be shared with law enforcement. One challenge for payments companies will be determining what kind of gun purchases would be deemed suspicious.
The card networks said they would work to implement the new code while supporting lawful purchases and protecting consumer privacy.
Gun-control advocates recently stepped up their long-running campaign to get banks and credit-card companies to do more to track and flag suspicious firearms sales.
Earlier this month, Democratic lawmakers wrote to Visa, Mastercard and Amex pushing for the implementation of a new MCC for gun and ammunition sellers, citing recent examples of credit cards being used to buy guns that were later used in mass shootings.
A new code for gun retailers would be “an important step towards ending financial system support for gun trafficking, gun violence, and domestic terrorism,” Massachusetts Sen. Elizabeth Warren and Pennsylvania Rep. Madeleine Dean wrote in a letter signed by dozens of other lawmakers.
The attorneys general of New York and California recently asked the card networks to begin tracking gun sales and flagging suspicious purchases to law enforcement. Financial companies already report potential money laundering and other kinds of criminal activity, they wrote in letters to the three companies, and should do the same for suspicious gun sales.
Banks and other card issuers keep tabs on all sorts of transactions to manage risk and to prevent illegal activity. They have blocked consumer card purchases considered risky or prone to fraud or in a legal gray area. They also act as agents of the government in monitoring payments for suspicious activity, including transactions that could finance terrorism.
The payments industry has long been divided on whether to assign MCCs to gun shops. Some executives in private discussions have flagged concerns that it could lead to the creation of more codes that could be used to crack down on controversial businesses such as abortion providers.