The refusal of a leading credit card payment handler to process transactions involving legal gun sales is compelling licensed dealers to hunt for alternative credit card systems, and is provoking boycotts by incensed gun enthusiasts who complain of political interference.
The controversy erupted late in September with word that Authorize.net, one of the nation's largest credit card "payment gateways," abruptly severed its business relationship with the Hyatt Gun Shop of Charlotte, N.C., which calls itself the nation's largest gun store.
The reason, according to an email sent by Authorize.net to Hyatt Gun Shop owners: The Hyatt Gun Shop is a shop that sells guns and, thus, it is in violation of Authorize.net's "acceptable use guidelines."
Justin Anderson, the store's director of marketing, said the notice came as a shock. Hyatt and Authorize.net had been doing business for four years, he said, and nothing about his business or its relationship to Authorize.net had changed.
Upfront about gun sales
"When we approached them to do business with us, the first thing we did was make sure we were completely clear about the nature of our business," Anderson said. "We do sell guns, we do sell guns online, and, at the time, there were no problems."
He and other licensed gun dealers acknowledge that their business is controversial, but they emphasize that it is legal and they say it is heavily regulated.
Whether you support or oppose the current state of firearm sales in the United States, Anderson said, it simply is unfair for any branch of the financial system to lump the legal sales of guns with the illegal sales of drugs or other banned substances -- and to refuse to handle transactions for both.
"It blows my mind that a company like ours that is so heavily regulated would fall into a situation like this," Anderson said. "A lot of gun businesses have been dropped by Authorize.net. They've been dropping people left and right."
Before we go any further, a few facts:
- This credit card controversy involves only online sales, not face-to-face transactions in brick-and-mortar stores or, for the most part, legal sales at gun shows.
- That's because "payment gateways" play a role only in Web-based or other online credit card transactions. In simple terms, Authorize.net and other payment gateways are e-commerce service providers that encrypt credit card information and provide other crucial services during those few seconds between the moment when a credit card user punches the "Purchase" button for an online purchase and the moment when that user receives a confirmation.
- The major credit card payment processing companies -- Visa, MasterCard, American Express, Discover -- are neutral observers of this controversy between payment gateways and firearm dealers. Their representatives say they have no policies that restrict use of their cards for legal transactions regarding guns.
That said, Visa owns Authorize.net and its parent company, Cybersource Corp. As a consequence, Visa has been drawn at least tangentially into the dispute.
"We urge all of you who shop online to boycott any website displaying the Authorize.net or Cybersource logo," Hyatt Guns says on its website.
The boycott, of uncertain effectiveness, has received some national publicity and also is being promoted by Grass Roots North Carolina, which calls itself a "no-compromise gun rights group."
"It looks like the small but noisy anti-gun crowd has gotten to what must be a jelly-spined PR department at CyberSource and Authorize.net," the group says on its website. "Either that, or leadership at these companies have simply become anti-gun all on their own. Whatever the cause, Authorize.Net is making it clear that businesses lawfully selling firearms are undesirable and need not apply."
Silencer on for card companies
Several in-house spokesmen and spokeswomen for Visa and its Authorize.net and CyberSource units did not respond to numerous requests for comment, ultimately referring the inquiries to an outside media relations specialist.
That spokesman said he was authorized to say only this about Authorize.net: "Authorize.net is an e-commerce service provider and subsidiary of Visa. It maintains different risk policies from Visa because it offers different services." He would not specify what he meant by "different risk policies."
Wait a second, say gun dealers. How did we get in there?
"That's what we wonder," Anderson said, "and we wonder if this is being driven more by politics than by business."
And so, inevitably, politics has become involved.
Political influence claim
An online article in the Washington Examiner, which has ties to conservative groups and figures, linked Authorize.net's anti-gun action to Visa, which it called "a key Obama campaign donor." Later, the article noted that the "key" 2012 contribution to President Obama's re-election campaign from Visa executives totaled $21,780. It didn't report that Visa executives also contributed $22,375 to Republican candidate Mitt Romney.
For their part, the major credit card companies said they have no problem clearing transactions related to legal gun sales -- once those transactions work their way through payment gateways or other elements of the financial system.
- American Express: "American Express cards can be used to purchase firearms, so long as they are sold legally," said Marina Hoffmann Norville, an AmEx vice president and corporate spokeswoman.
- MasterCard: "There has been no change in our policy," said Jim Issokson, a spokesman for MasterCard Worldwide. "Legal transactions are permitted."
- Discover: "We do not prohibit legal gun sales," said Katie Henry, a spokeswoman for Discover. "Acquirers [banks or other financial institutions that process credit card transactions] are required to ensure that merchants are acceptable under our operating regulations."
- Visa: "Visa does allow legal transactions on its network, including the sale of firearms and ammunition," said the company's outside spokesman.
Anderson, the marketing director for Hyatt Guns, confirmed that he has no problems getting transactions cleared by the major credit card companies -- after he figures out how to get those transactions through the middlemen.
"We never had a problem with Visa," he said. "And, once we switched gateways, we had no problems with Visa."
Other payment options open
Anderson and other gun dealers found that, as Authorize.net retreated from gun shops, several other payment gateway operations marched into the breach.
One of the most active is Payment Alliance International of Louisville, Ky., which has forged relationships with the National Rifle Association and the National Shooting Sports Foundation. Payment Alliance promotes its "gun-friendly credit card processing" solutions, including "mobile payment solutions for gun shows -- some work with your existing smartphone or tablet."
"We are helping federally licensed firearm dealers receive the fair and gun-friendly merchant services they deserve," said Nathan Danus, vice president of national accounts for Payment Alliance.
He said the issue has been percolating on a low boil for some time, and his firm began recognizing a market opportunity about 10 years ago.
"Payment gateways, card processors and lenders have been shutting down gun dealers' 'card-not-present' business for close to a decade now," he said. "This makes it nearly impossible for these hardworking Americans to find secondary distribution points to sell their goods or services."
Danus said Authorize.net and any other firms that refuse to work with licensed gun dealers are doing a disservice to military veterans and others who simply are trying to purchase a legal product.
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