Assembly Standing Committee on Banking and Finance

So, with that, let's move on to the hearing. And seeing that we don't have a quorum yet, we will continue as a Subcommittee. We don't have a consent calendar, so we will go directly to Bill presentations. We have one Bill up today. That is Bill AB 1587, file item number one. The recommendation is that the 7th Amendment be concurred in with that Assembly Member team. When you are ready, please begin with your open statement.

Thank you, Mr. Chair. AB 1587 is a very simple Bill. We have merchant category codes for every single kind of retail operation you can think of that are used by credit card companies. We are directing the credit card companies to use the merchant category code that was developed in 2022 by the International Organization of Standardization. This code would be separate for a firearms retailer. Currently, firearms retailers are combined with sporting goods like Dick Sporting Goods and obviously, and Big Five.

Again, this Bill is specific to only California businesses. And this will help in terms of identifying when there are legal straw purchases, or help us identify any kind of illegal activity. Be a help for law enforcement. With that respect for us, if aye vote on AB 1587, we have Rebecca Marcus here on behalf of the Brady Campaign as the first witness.

Thank you, Assembly Member Ting. And before we go to our witness to speak, I would like to establish a quorum. Secretary, will you please call the roll.

Grayson here, Chen, Bauer-Kahan here, Cervantes here, Dixon here, Mike Fong here, Gabriel here, Petrie-Norris here, Soria, Waldron here, Wicks here, Wilson.

So, we have quorum. We've established a quorum. We do have a motion by Assembly Member Bauer-Kahan and a second by Assembly Member Gabriel. And we are ready to hear from our witness.

Fantastic. Good afternoon, Chair Members, Rebecca Marcus representing the Brady Campaign in strong support of 1587. Since the motion has already been made, I'll be brief, but California has been a national leader on fighting gun violence, and the gun laws passed by this Legislature are the nation's strongest. With the recent establishment of an MCC code for firearms businesses, we now have an opportunity to utilize an important tool to prevent illegal gun trafficking and mass shootings.

Gun traffickers routinely used credit cards to buy the guns they illegally traffic. Some of these are stolen credit cards, and some are cards used in straw purchases. This Bill will ensure use of a tool that can be used to prevent gun violence before it happens. The Brady Campaign, alongside our co sponsor Giffords, asks for an aye vote. Thank you.

Thank you very much for your testimony. And do we have any other witnesses in support in the room? Please come forward to the microphone. State your name. Seeing none, do we have any witnesses in opposition? Please come forward. If you will just state your name and begin with your testimony. Thank you.

Mr. Chair, Members of the Committee. For the record, Dan Reid with the National Rifle Association. We're here in opposition today. Obviously, this has been a newer issue that's come up with these credit card codes. And I think there's a lot of question about how this works, what it actually looks like, and what are the actual law enforcement purposes of it. Because my understanding of MCC codes, you don't actually know what is being purchased.

So if you go into a shop and you buy a candy bar or you buy a boat at one of these establishments that's required to use this code, it's going to be a firearm or ammunition type code. If you look at this Bill, it exempts our largest firearm retailers in the state, where people often go buy firearms and ammunition. So it's just going to be the little guys that do this. The system is easily bypassed, defeated by utilizing cash.

So if someone is trying to do traffic guns, create straw purchases, there are other options around this. I don't know how law enforcement is triggered without invading the privacy of people who are going out and making lawful purchases in this state. You have to go through a dealer. They have to be a licensed dealer. So I don't exactly know how this works. There's no guidance on what constitutes suspicious activity.

If you go to a store and you buy $3,000 worth of fishing lures, it might trigger an MCC code, if that's what code is assigned to that particular store. And so I think it puts some of those financial, those payment processors in an awkward situation about the balance between privacy of their consumers and when to notify law enforcement. So I'm very curious about that. I'm unaware of any other MCC codes that carry a violation for non use.

It's my understanding these codes were never intended to be utilized for this. There's also a huge interstate commerce question. There are some states currently on the books that ban the use of these codes. So, for example, if someone lives in the State of Texas or Idaho and wishes to purchase a firearm legally, and they're purchasing from out of state to a California dealer, how does a payment processor supposed to handle that? What do they do?

What kind of conflict does that create for them where it's banned in a home state? I'm not sure. I haven't heard a good answer on that question. I think that's something that needs to be worked out. I think a lot of these details need to be worked out. Thank you so much.

Mr. Chair and Members, Sam Peredes, representing Gun Owners of California. We also have some very serious questions. Number one, all of the major credit card companies when this issue was brought up on a national level, made statements from their corporate levels and executives that they were not interested in using these codes because they don't see themselves as a part of the law enforcement process. So that's going to create a problem.

So what California is saying, okay, Visa, MasterCard, Discover, American Express, if you don't use these codes, we're going to fine you're, going to be breaking the law and we're going to fine you for not using these codes. Here's another thing. In California, if we're looking at suspicious purchases and things like that, in California, we have a one gun a month law. So you can't buy more than one gun of any kind per month.

As a matter of fact, you cannot buy more than one part for a gun within any 30 day period. And the fact that a lot of the dealers that I think are trying to be encompassed in this, the level of income that they receive is below the threshold of 50% from firearms and therefore they don't have to comply, the credit card companies do not have to comply with doing that.

And we are talking about the people, the retailers that sell significantly more than 50% of all of the guns in the State of California. So that is going to be a difficult thing. Ultimately, we're not the ones who's going to sue the State of California on this issue. The credit card companies, if they don't like mandates, and they may go ahead and challenge this. But as far as making this a law enforcement tool, it just doesn't happen.

You can go to a gun store and you can buy a Safe, maybe cost you 3,000, 10,000, $20,000 and is that going to trigger suspicion? But there are no guns that are valued at that level. So you buy one gun a month that's complying with California law. So this use as a tool is truly not effective at providing any sort of information to law enforcement.

And now that means that law enforcement companies are going to have to subpoena or get a court order to get this confidential commercial information from the credit card companies in order to conduct investigations because the credit card companies have said they are not going to aggregate this information. They are not going to do that. So for these reasons, we are in pretty strong opposition to this Bill.

Thank you for your testimony. And do I have further opposition in the room? If so, please step forward to the microphone. State your name. Seeing none, we will bring it back to the Committee for questions or comments. Are there questions or comments from the Committee Members? Assembly Member Dixon.

I'm new here. Kind of. So this is a gut and amend Bill. So this is the first and only policy Committee that's looking at this. Is there any other Committee that we'll be looking at? Do we know.

If the Bill gets out of this Committee, it will go to the floor, to the Assembly floor.

It was heard in the Senate.

So based on hearing these questions from these gentlemen, I just think this is there are a lot of unknown answers and, I'm afraid, concern that legitimate people who I've never been into a gun store in my life, so I'm just thinking of legitimate people who may be going into these stores and making legitimate purposes purchases. They'll be caught up in this kind of an invasion of privacy, if you ask me. So I'm concerned about that. I think it's just too I would like to have more discussion on this and hear more about it. But we're rushing it so quickly. I don't think that's the smart thing to do from good policymaking. Thank you.

Thank you. Assembly Member Dixon, are there any other comments or questions? Seeing none, author, do you wish to make a closing statement?

I was going to make a quick close. Again, these merchant category codes are in existence today. When you get your credit card Bill, you see the codes for every single purchase that you get. This code was developed by the international organization that develops codes. So, again, all we're asking for is that the firearms retailers use the credit card companies use a separate code created by the firearms companies. That's simple. You go to a gas station, get a purchase, there's a code.

You go to a bookstore, there's a code. You go to a clothing store, there's a code. There's nothing unfamiliar about these codes or how they're used by credit card companies. Again, Bill's very simple should there be illegal activity, law enforcement does what law enforcement does in terms of investigations, whether you're stealing clothes, stealing books, stealing firearms. Right? And so, again, this is just about getting the credit card companies to use this code. Respectfully ask for aye vote on AB 1587.

Thank you, Assembly Member Ting. With that, we do have a motion at a second, we will call for Secretary to call roll.

AB 1587. The motion is for Senate amendments be concurred in. Grayson aye. Chen. Baruer-Kahan aye. Cervantes aye. Dixon no. Mike Fong aye. Gabriel aye. Petrie-Norris aye. Soria. Waldron no. Wicks aye. Wilson. That Bill has seven votes.

The Bill has seven votes. It gets out, and we will hold it open for absent Members.

Thank you, Mr. Chair.

Thank you. Assembly Banking and Finance Committee is adjourned. Thank you very much.