January 9th, 2008

Citi/First Data Anti-Gun Policies Stir Controversy, Calls for Boycott

The news that Citi Merchant Services and First Data have refused to process sales for guns and gun accessories has spread like wildfire across the internet, arousing the ire of gun owners around the country. The story broke when the NSSF reported that Citi Merchant Services and First Data terminated the merchant account of CDNN Sports, a large, Texas-based gun retailer. There have been calls for the boycott of Citicorp/Citibank/Citi-Card products, as many gun owners have vowed to close their Citibank accounts or terminate their Citi-affiliated credit cards.

Interestingly, this isn’t the first time Citicorp/Citigroup has faced a boycott threat from gun owners. In 2000, after Citibank imposed a “no firearms” policy on a Nevada gun range, firearms owners nationwide responded with a boycott that caused Citibank to alter its policies.

The Year 2000 Citibank Boycott
As reported by the Second Amendment Foundation (“SAF”), the “Battle began with a February 7, 2000 letter from Citibank to the Nevada Pistol Academy stating that their recently approved account would be closed in ten days ‘due to Citibank not maintaining accounts for businesses that deal in weapons.’ This letter revealed an otherwise secret policy of refusing accounts from lawful, Federally-licensed firearm-related businesses.” In response to a threatened boycott from the SAF and other firearms groups, Citibank, a member of CitiGroup, agreed to drop its policy of refusing accounts of lawful firearms businesses. Citibank agreed to treat small firearms sellers the same as other businesses “using the same standards” according to a Citibank media statement.

Citicorp and First Data Alliance
Fast forward to 2008 — In the current dispute, some folks have wondered whether Citicorp is directly involved in the denial of card processing services to CDNN Sports which sparked the controversy. The answer is yes. Though First Data provides processing solutions, Citi Merchant Services handles the actual banking end of the card processing. First Data explains: “Citi Merchant Services provided by First Data Merchant Services Corporation is a contractual alliance in the U.S. between Citicorp Payment Services, Inc. (CPSI) and First Data Merchant Services Corporation (FDMS). FDMS provides all the systems, technology, processing services and customer support to the alliance. CPSI is the sponsoring card association member and provides the clearing and settlement functions on behalf of the alliance.”

Termination Based on Faulty Legal Interpretation
In terminating CDNN’s merchant services account, and freezing $75,000 of CDNN’s card collections, Citi Merchant Services (“CMS”) and First Data specifically cited the sales of firearms in interstate commerce as the reason. CMS/First Data asserted that interstate firearms sales violate the Gun Control Act and that “shipping across state lines is also banned”. CMS/First Data misconstrue the law, and ignore the fact that any and all firearms sold by CDNN to non-Texas customers must be shipped to licensed FFLs, in full compliance with Federal statute. If you have ever purchased a gun from CDNN you know it will only ship to verified FFL-holders.

Either CMS and First Data are completely ignorant of the law, or they are using a faulty interpretation of Federal law as a pretext to deny services to CDNN. Either way, the actions of CMS and First Data are unjustified. As one internet poster wrote: “Citi Bank [CMS/First Data] has taken the view that THEY are an arm of the BATF. Problem is, they do not even understand the rules.” Here is the termination letter sent to CDNN Sports. Click the image for a full size version with the key text highlighted:

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