Visa and MasterCard back down from Gun Store purchase tracking

WillyT

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Greetings everyone, I'm an electronic payment expert in my day job, and also a gun owner/advocate so just sharing some news with the NES community. The card associations, that logo on your credit or debit card, have backed off of the "Gun Store" MCC classification code rat hole. Why? Because it's biased to the buyer and merchant. Why it matters? Well, in the payment world, we classify transactions and tie them to risk with data codes for merchants classifications. Last year the card brands decided to carve out a code for anyone who sells firearms. This panicked buyers b/c damn near 70% of all firearm transactions happen with a plastic form of payment. This would of allowed the card brands to report the buyer to the Government in a evil fashion and make it more expensive for merchants for card fees in general. The problem with this ultimately was, well, what if the buyer bought just a holster, or pair of camo pants, at a gun store? Does that need to be reported on just b/c it was bought at a gun store? And should the store have to pay more fees b/c they sell guns, and other industry gear? Could this be "restraint of trade"?

So, small victory for gun owners for now. I say for now b/c the card brands are legal monopolies and NOT governed by congress. They decide the rules when and where they feel it's necessary. Hit the link for the details. Regards, Bill

Amex, Mastercard, Visa pause work on new firearms merchant code
 
This would have been a great way to continue this thread:

Or any of the others on the topic.
 
Is there a guarantee that the card companies have to notify their cardholders when (not if) they reinstitute this tracking. I don’t trust that they wil

The "tracking' is by forcing FFLs to change to a new merchant code (MCC), so while end-users won't be notified whether the processing network is "tracking gun purchases", the merchants (gun stores, sporting goods stores, etc) will know, as will anybody who knows how to do a lookup by MCC or by merchant name.
 
The issues with changing MCC is that you don't just go in and change it, especially without telling the merchant. MCC besides being used to determine interchange rates (card fees) it is part of determining risk. The risk of an individual merchant is used to determine if the payment processor for the merchant is going to require an escrow account and if so, how much cash needs to be in it. The payment processor is not just going to say to the merchant hey you have a new MCC and BTW you need an escrow account now with $xxxx in it. The merchant is going to go find a different payment processor with potentially lower fees and no escrow requirement. The other aspect of MCC is effects the programs merchants can participate in. VISA might be running a program for all merchants who sell some type of clothing. You have a hunting/outdoor clothing store that maybe sells some hunting ammo but no guns. A majority of the sales are the clothes not the ammo. Now they get slapped with the new MCC and can no longer participate in the VISA program that gives them lower interchange fees. You can bet the payment processor is going to hear about it and the merchant will fight the MCC change.
 
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The issues with changing MCC is that you don't just go in and change it, especially without telling the merchant. MCC besides being used to determine interchange rates (card fees) it is part of determining risk. The risk of an individual merchant is used to determine if the payment processor for the merchant is going to require an escrow account and if so, how much cash needs to be in it. The payment processor is not just going to say to the merchant hey you have a new MCC and BTW you need an escrow account now with $xxxx in it. The merchant is going to go find a different payment processor with potentially lower fees and no escrow requirement. The other aspect of MCC is effects the programs merchants can participate in. VISA might be running a program for all merchants who sell some type of clothing. You have a hunting/outdoor clothing store that maybe sells some hunting ammo but no guns. A majority of the sales are the clothes not the ammo. Now they get slapped with the new MCC and can no longer participate in the VISA program that gives them lower interchange fees. You can bet the payment processor is going to hear about it and the merchant will fight the MCC change.
Kinda... the MCC code is set by the processor and they don't call it an escrow account. They call it a reserve account and both MCC's and reserve's are a derivative of the risk at hand and financial condition of the merchant. The MCC also does something sneaky at the bank issuing level. It set's up an alert to different banks that may or may not want to do business w/ a certain MCC classification code. And, I'll add it's hard for a processor to change a MCC code for a merchant to a more favorable classification once they have a transaction history by card and MCC type. Have we done it, yes. It's challenging and the liability for the MCC classification lies completely with the processor for each merchant.
 
Is there a guarantee that the card companies have to notify their cardholders when (not if) they reinstitute this tracking. I don’t trust that they will.
No guarantee. And the card brands will never notify card holders of anything. They don't even talk to merchants on the daily. The communication to the merchant lies with the card processor for the merchant. This is why you don't go to PayPal or Square for payments, not that they like anything to do with guns anyway but they don't communicate well, once you need advice.
 
Kinda... the MCC code is set by the processor and they don't call it an escrow account. They call it a reserve account and both MCC's and reserve's are a derivative of the risk at hand and financial condition of the merchant. The MCC also does something sneaky at the bank issuing level. It set's up an alert to different banks that may or may not want to do business w/ a certain MCC classification code. And, I'll add it's hard for a processor to change a MCC code for a merchant to a more favorable classification once they have a transaction history by card and MCC type. Have we done it, yes. It's challenging and the liability for the MCC classification lies completely with the processor for each merchant.

Forgive me for using escrow instead of reserve. Basically the same.

I know all about MCC and classification codes. I spent a fair amount of time working on interchange calculation engines although I will admit most of the work I did was with Level 2 and 3 data. and special programs, mostly from VISA and dealing with Corporate Cards.

As far as what the issuing bank does with MCC is not really a factor in my work. Issuing bank either approves/declines a txn and we go from there.

My point was, politicians and social warriors who say just change the MCC and track purchases have no clue how the system works and really how unbelievably complicated it is. I never even though about the all the stuff involved in CC purchasing until I started working for a payment processor. Now 10 years later and it is even more convoluted and complicated with all the alternative payment methods you need to deal with.

Regardless I'm just an old time software guy, who happens to work for a large payment processor, trying to stay working a few more years so I can bankroll additional cash. Tell me how you want the system to work and I'll make it do it.
 
Greetings everyone, I'm an electronic payment expert in my day job, and also a gun owner/advocate so just sharing some news with the NES community. The card associations, that logo on your credit or debit card, have backed off of the "Gun Store" MCC classification code rat hole. Why? Because it's biased to the buyer and merchant. Why it matters? Well, in the payment world, we classify transactions and tie them to risk with data codes for merchants classifications. Last year the card brands decided to carve out a code for anyone who sells firearms. This panicked buyers b/c damn near 70% of all firearm transactions happen with a plastic form of payment. This would of allowed the card brands to report the buyer to the Government in a evil fashion and make it more expensive for merchants for card fees in general. The problem with this ultimately was, well, what if the buyer bought just a holster, or pair of camo pants, at a gun store? Does that need to be reported on just b/c it was bought at a gun store? And should the store have to pay more fees b/c they sell guns, and other industry gear? Could this be "restraint of trade"?

So, small victory for gun owners for now. I say for now b/c the card brands are legal monopolies and NOT governed by congress. They decide the rules when and where they feel it's necessary. Hit the link for the details. Regards, Bill

Amex, Mastercard, Visa pause work on new firearms merchant code
Discover is still on board?
 
The "tracking' is by forcing FFLs to change to a new merchant code (MCC), so while end-users won't be notified whether the processing network is "tracking gun purchases", the merchants (gun stores, sporting goods stores, etc) will know, as will anybody who knows how to do a lookup by MCC or by merchant name.
In MA....this doesn't matter.....your purchase is tracked via federal and state paperwork anyway. This is a nothing burger for those in Commie states.
 
In MA....this doesn't matter.....your purchase is tracked via federal and state paperwork anyway. This is a nothing burger for those in Commie states.
OTOH, while MA resident purchases are tracked by both the feds and the state, ut there's at least a veneer of controls over how and to whom they disclose those records (selling consumer data is a major revenue source for Mastercard), or allow the card issuer or your bank to stop transactions a la Operastion Chokepoint.

In one of the earliest OpEds promoting the MCC, Andrew Ross Sorkin wrote:
NYT said:
If banks chose to use the systems they already have in place, they might decide to monitor such customers, perhaps preventing them from buying multiple guns in a short period of time.
...
In 29 states, consumers cannot use credit cards to buy lottery tickets because legislators don’t want consumers racking up debt gambling. And under the Gun Control Act of 1968, firearms dealers must report if someone buys two or more handguns in a span of five business days.
That requirement can be evaded simply by buying at more than one store, but a system involving the banks and credit card networks could have the opportunity to flag the purchases.
Visa's data business provides transaction history on an aggregated "zip-code" level. But the zip codes it uses are zip+4 numbers—often specific enough to pinpoint a single address. The same media outlets who love to publish maps of concealed carry licensees would definitely abuse this data, as would the demanding moms, etc.
 
OTOH, while MA resident purchases are tracked by both the feds and the state, ut there's at least a veneer of controls over how and to whom they disclose those records (selling consumer data is a major revenue source for Mastercard), or allow the card issuer or your bank to stop transactions a la Operastion Chokepoint.

In one of the earliest OpEds promoting the MCC, Andrew Ross Sorkin wrote:

Visa's data business provides transaction history on an aggregated "zip-code" level. But the zip codes it uses are zip+4 numbers—often specific enough to pinpoint a single address. The same media outlets who love to publish maps of concealed carry licensees would definitely abuse this data, as would the demanding moms, etc.
Ummmm......if your in MA......your own fxcking state just abused this data for you on an easy to complile and list spreadsheet.

So again.....unless they start declining my purchases for firearms.

Tracking and the data associated with it in MA....has been already breached by our own government who can't even follow its own laws.
 
Is there a guarantee that the card companies have to notify their cardholders when (not if) they reinstitute this tracking. I don’t trust that they will.
No guarantee. The card associations (Visa and MC) are independent of the government, and stand alone entities. Each is pubilc and does it's own thing. They are governed by the card issuing banks, of which there are 18K in the US give or take... Basically, they can do their own thing when/if they want if it sounds good to them.
 
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