Dive Brief:

• Sen. Elizabeth Warren this week renewed her call for the U.S. Treasury Department to issue guidance for payment networks and financial institutions related to implementation of a merchant category code for credit card transactions at gun and ammunition retailers.
• “The need for uniform, clear federal guidance on this interstate commerce issue is becoming increasingly clear as states adopt differing and confusing rules about the gun store MCC,” Warren and 32 other congressional Democrats wrote in a Wednesday letter to Treasury Secretary Janet Yellen, among other regulators.  
• The lawmakers called on Treasury to prod payment networks to make the gun MCC available; require merchant banks to assign the code; and issue guidance on recognizing activity potentially associated with gun crimes. They also asked for answers to questions on the topic by April 11.

Dive Insight:

The letter was also addressed to Federal Deposit Insurance Corp. Chairman Martin Gruenberg, Federal Reserve Board Vice Chairman Michael Barr, Financial Crimes Enforcement Network Director Andrea Gacki and Acting Comptroller of the Currency Michael Hsu. 

This week’s letter comes just over a year after Warren and 13 other senators urged the Treasury and Justice departments to quickly put forth guidance designed to facilitate implementation of the gun code. 

Since then, states have taken opposing sides on the issue: At least seven states, including Texas and Florida have enacted laws blocking use of the gun MCC, and several other states are considering similar bills, the letter noted. Meanwhile, California has passed a law requiring the code be used, and the card networks are reportedly taking steps to comply with it; New York and Colorado are weighing similar bills. 

“This cascade of state legislation has eroded the uniformity that payment networks depend on to ‘operate and route transactions safely, securely, and reliably,’” lawmakers wrote. “As additional states pass MCC laws, the existing confusion will only intensify.”

Additionally, dueling bills were introduced in Congress last month by Democrats and Republicans. The gun merchant category code has been a politically charged issue for the card networks since it was approved by the International Organization for Standardization in September 2022 and published in February 2023. 

Last December, Warren and other legislators called out the CEOs of card networks Visa, Mastercard, American Express and Discover Financial Services, expressing disappointment in their move to pause implementation of the code. In response to questions from lawmakers, card company CEOs said conflicting state legislation has resulted in “uncertainty” for their operations.

“Treasury should eliminate that uncertainty by making clear that, under federal law, payment networks and banks are expected to use the most specific MCC available, particularly for high-risk merchants,” lawmakers said in this week’s letter. 

Legislators urged the Treasury Department to work with bank regulators to issue guidance “making clear that the MCCs can promote banks’ safety and soundness when conducting merchant processing.” 

Additionally, the department should issue a regulation to preempt state laws “that purport to forbid financial institutions from meeting their obligations under federal law,” underscoring that compliance with safety and soundness expectations means using the most accurate MCC available, lawmakers wrote. 

They also called on FinCEN to put forth an advisory to payment networks and banks on acts that could precede gun crime, such as gun purchases using stolen credit cards, and about the firearm purchasing scenarios that financial regulators or law enforcement should be alerted to.

Seeking answers by April 11, the legislators asked the OCC, FDIC, FinCEN and the Fed what guidance they each plan to offer banks regarding use of MCCs in light of conflicting state laws, and questioned how the Treasury views the role of MCCs “in advancing the goals of the Bank Secrecy Act and banks’ safety and soundness practices.” 

Spokespeople for the Fed and OCC declined to comment. Spokespeople for the FDIC, FinCEN and Treasury Department didn’t immediately respond to requests for comment.