They’re not used in Iowa. So why did a bill to ban credit card codes for gun purchases advance?

DES MOINES — A Senate subcommittee advanced a bill Wednesday already passed by the House to prohibit the use of a merchant code for credit card transactions at gun retailers meant to detect suspicious firearms and ammunition sales — even though lobbyists said credit card companies don’t plan to use the codes in Iowa.

Representatives of Iowa's credit unions told lawmakers there’s no need for the bill.

“Our card issuers don’t have access to the (Merchant Category Codes),” Madison Grady, a lobbyist with the Iowa Credit Union League, told lawmakers. “We just don’t see a need for (the bill) right now. We’re not currently storing any of this firearms information.”

Justin Hupfer, also with the Iowa Credit Union League, said credit unions are not declining transactions in Iowa because of gun purchases.

“I don’t think there’s a problem in Iowa that needs to be addressed, but we also don’t have any operational concern with,” Hupfer said.

House File 2464 would prevent banks and credit card companies from using a merchant code that would differentiate a gun shop from a general merchandise or sporting goods store. The bill also would prohibit banks and credit card companies from declining a transaction based solely on a firearms code attached to the store.

And it would bar state and local governmental agencies from keeping a record or registry of privately owned firearms, except for records kept during the regular course of a criminal investigation, a prosecution, any court case or as otherwise required by law.

The bill was amended to codify current standard practices of financial institutions to provide consumer protections, including to help detect and deter illegal or suspicious activities, and also prevent fraud by alerting customers of a suspicious purchase.

Supporters of the bill have said it aims to prevent financial institutions from creating a de facto gun registry.

Merchant category codes are used to classify different types of businesses by the types of goods and services sold. The U.S. Treasury Department’s Financial Crimes Enforcement Network has sent guidance to financial institutions encouraging them to use new merchant category codes that would help them monitor and report suspicious activity connected to illegal firearms trafficking, money-laundering proceeds from trafficking in firearms or other criminal activity.

Major credit card companies are moving to make a merchant code available for firearm and ammunition retailers to comply with a new California law that will allow banks to potentially track suspicious gun purchases and report them to law enforcement.

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Visa, Mastercard and American Express had paused the implementation of the new code because some Republican-led states are working to block its enactment.

Grady said representatives from Visa have assured the credit union league that they have no intention of using the firearm code in other states and it will be used only in California because of the new law there.

Gun rights advocates said the code is an infringement on privacy and Second Amendment rights.

“There is a movement … to try to identify people who buy firearms or firearms-related equipment, and to make a judgment — a subjective judgment — on whether that’s proper, whether they bought too much, whether they bought the right things or the wrong things,” said Richard Rogers, a volunteer lobbyist and board member of the Iowa Firearms Coalition. “We think this is important to protect privacy.”

Sen. Tony Bisignano, D-Des Moines, who served on the subcommittee that advanced the bill, called it a “boogeyman” but was not opposed to the bill, noting the American Civil Liberties Union of Iowa was registered in support.

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Sen. Jason Schultz, R-Schleswig, who chaired the subcommittee, said while the codes are not an issue in Iowa, he believes there “is a future national discussion that I think we want to have in place ahead of.”

The bill now moves to the full Senate Commerce Committee for consideration.

Comments: (319) 398-8499; tom.barton@thegazette.com