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Financial Services Law Insights and Observations

States, Democrats urge card companies to create gun-store MCC

State Issues New York California Credit Cards Congress State Attorney General

State Issues

On September 2, the California and New York attorneys general sent a letter to the CEOs of three credit card companies asking for the establishment of a unique merchant category code (MCC) for gun store purchases, writing that a specially-designated MCC would help companies flag suspicious activity. The letter follows recent requests sent by several congressional Democrats to the same companies urging them to establish an MCC code for guns. According to the Democrats’ letter, MCCs are four-digit codes maintained by the International Organization for Standardization (ISO) that classify merchants by their purpose of business and are used “to determine interchange rates, assess transaction risks, and generally categorize payments.” The letter noted that according to ISO’s criteria, “a new MCC may be approved if (a) the merchant category is reasonable and substantially different from all other merchant categories currently represented in the list of code values; (b) the merchant category is separate and distinct from all other industries currently represented in the list of code values; (c) the proposal describes a merchant category or industry, and not a process; (d) the minimum annual sales volume of merchants included in the merchant category, taken as a whole is, US$10 million; and (e) sufficient justification for the addition of a new code is found.” The letter stated that a “new MCC code could make it easier for financial institutions to monitor certain types of suspicious activities including straw purchases and unlawful bulk purchases that could be used in the commission of domestic terrorist acts or gun trafficking schemes,” and could garner coordination between financial institutions and law enforcement to aid efforts across the federal government to identify and prevent illicit activity. The letters requested feedback to better understand the companies’ positions.