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Banks, Card Companies Explore Ways to Monitor Gun Purchases

The Wall Street Journal. logo The Wall Street Journal. 4/30/2018 AnnaMaria Andriotis, Telis Demos, Emily Glazer

© Dominick reuter/Agence France-Presse/Getty Images Banks and credit-card companies are discussing ways to identify purchases of guns in their payment systems, a move that could be a prelude to restricting such transactions, according to people familiar with the talks.

The discussions are preliminary but could be deeply controversial. Gun-rights groups have long resisted any effort to monitor which Americans own guns; there are federal laws limiting the government’s use of electronic databases of gun sales.

The financial companies have explored creating a new credit-card code for firearms dealers, similar to how they code restaurants, or department stores, according to people familiar with the matter. Another idea would require merchants to share information about specific firearm products consumers are buying, some of the people said.

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Such data could allow banks to restrict purchases at certain businesses or monitor them. The talks, which are informal and might not lead to any action, have occurred against the backdrop of the national debate around guns in the wake of the Parkland, Fla., high-school shooting, which left 17 dead.

Financial firms already have come under pressure from both sides in the gun debate.

Senate Banking Committee Chairman Mike Crapo (R., Idaho) last week sent letters to Citigroup Inc. and Bank of America Corp. criticizing moves by the companies to enforce new policies on gun-industry clients or to stop doing business with certain gun makers.

The prior week, the American Federation of Teachers announced it would cut ties with Wells Fargo & Co. over what it said was the bank’s failure to discuss with the union its relationship with the National Rifle Association and gun manufacturers.

Even a move to monitor gun purchases would be contentious, highlighting concerns about the use of consumer data and Wall Street’s involvement in a sensitive political area.

“There’s a privacy angle here,” said Adam Levitin, professor of law at Georgetown University. “There’s the slippery slope danger if it’s guns today maybe it is pornography tomorrow and the day after it’s right-wing literature.”

Gun-control advocates counter that banks keep tabs on all sorts of transactions to manage risk and to prevent illegal activity.

“Knowing where the customers are shopping isn’t a slippery slope to anything, it’s just one data point,” said Nicholas Suplina, director of criminal-justice policy and enforcement at Everytown for Gun Safety, an advocacy group whose advisory board includes Warren Buffett and former New York City Mayor Michael Bloomberg, a Republican-turned-Independent. “I don’t think anybody’s asking financial institutions to determine whether a transaction is good or bad, but it may very well be a good idea for them to understand risks inherent in firearm sales.”

Banks have at times 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 such as transactions that could finance terrorism.

In rare cases, banks have stopped doing business with politically unpalatable groups, such as with the South African government during the 1980s anti-apartheid movement. But banks haven’t typically tried to block or restrict controversial purchases made by consumers.

How companies use data generated by people’s activities has become a flashpoint in the wake of the controversy about the harvesting of consumer’s personal information and activities at Facebook Inc. by outside companies.

“A bank could say, ‘We’re not going to do business with gun manufacturers,’ ” said Jeremy Stein, a former member of the Federal Reserve board of governors who currently is an economics professor at Harvard University. “But when it gets into using the information, you’re getting into the same issues Facebook and others had problems with.”

A dividing line, he added, would be whether banks are monitoring transactions for criminality. “If it’s just a policy objective, even if I liked the policy objective, I’d think it’s worrisome,” Mr. Stein added.

Divisions exist within the financial-services industry, which previously has resisted pressure to restrict purchases of controversial products such as tobacco.

“We don’t think it’s a good idea for banks to decide what products and services Americans can buy,” Wells Fargo CEO Timothy Sloan said at the bank’s annual meeting last week. “It should not be up to me, to us, to decide that. It should be up to folks following the laws and folks making decisions.”

Citigroup, following the Feb. 14 Parkland shooting, adopted a new code of conduct for gun dealers and manufacturers the bank does business with. The code includes firearms retailers restricting sales for buyers under age 21.

CEO Michael Corbat said at that bank’s annual meeting that the policy “is intended to preserve the rights of responsible gun owners like myself, while relying on best sales practices to keep firearms out of the wrong hands.”

The policy “does not impact the ability of Citi customers to use their credit and debit cards for the legal purchase of firearms,” according to a bank spokesman.

Separately, discussions among some banks and card networks around possible gun-related actions related to cards have so far centered on so-called merchant-category codes. Also known as MCCs, these identify the type of merchant where consumers are shopping. A small number describe the type of product, including a code for office furniture and digital games.

One possibility is the creation of a new code that categorizes gun dealers. That would be shared with card companies, banks, and payment processors when cardholders make purchases at those merchants.

Card networks such as Visa Inc. or Mastercard Inc. can create MCCs or can request approval for one from a Switzerland-based standards group so that it is applied throughout the payments industry.

Currently, card companies, including networks and banks that issue credit cards, have little to no insight into gun purchases. Gun sellers fall into broader categories such as sporting-goods retailers or specialty retail shops. Big-box retailers that also sell guns are often assigned codes that include “variety” or “discount” stores.

An area of discussion, according to the people familiar with the talks: How far reaching a new MCC would be. This code could identify purchases made at gun dealers—but not at merchants that primarily sell other products, such as Walmart Inc.

Some talks have gone further. At least one large U.S. bank has had early conversations with lawmakers about potential legislation to require merchants to share information about specific gun-related products consumers are buying with their cards, according to people familiar with the matter.

Write to AnnaMaria Andriotis at, Telis Demos at and Emily Glazer at

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