By: Schaefer H.B. No. 2837

A BILL TO BE ENTITLED

AN ACT

relating to prohibiting financial institutions in Texas from surveilling, reporting, or tracking the purchase of firearms and ammunition; imposing a civil penalty.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. This act shall be known and may be cited as the "Second Amendment Financial Privacy Act".

(a) The Legislature finds that:

(1) The Second Amendment to the United States Constitution guarantees the people the right to keep and bear arms;

(2) Article I, Section 23, of the Texas Constitution provides that "Every citizen shall have the right to keep and bear arms in the lawful defense of himself or the State.";

(3) In September 2022, the International Organization for Standardization (ISO), based in Switzerland, approved a new merchant category code for firearm and ammunition merchants;

(4) In the letter to payment card networks, federal lawmakers stated that the new Merchant Category Code for firearms retailers would be ". . .the first step towards facilitating the collection of valuable financial data that could help law enforcement in countering the financing of terrorism efforts", expressing a clear government expectation that networks will utilize the new Merchant Category Code to conduct mass surveillance of constitutionally protected firearms and ammunition purchases in cooperation with law enforcement;

(5) The new Merchant Category Code will allow the banks, payment card networks, acquirers, and other entities involved in payment card processing to identify and separately track lawful payment card purchases at firearms retailers in the State of Texas, paving the way for both unprecedented surveillance of Second Amendment activity and unprecedented information sharing between financial institutions and the government;

(6) This potential for cooperative surveillance and tracking of lawful firearms and ammunition purchases will have a significant chilling effect on citizens wishing to exercise their federal and state constitutional rights to keep and bear arms in Texas;

(7) While federal law requires some financial institutions to report transactions that are highly indicative of money laundering or other unlawful activities, there is no federal or state law authorizing financial institutions to surveil and track lawful activities by customers in cooperation with law enforcement;

(8) The creation or maintenance of records of purchases of firearms or ammunition or the tracking of sales made by a retailer of firearms or ammunition by a nongovernmental entity, including a financial institution, without a substantial and historical business need or a requirement imposed by law, may frustrate the right to keep and bear arms and violate the reasonable privacy rights of lawful purchasers of firearms or ammunition; and

(9) Based on the above stated findings, it is the intent of the Legislature to prohibit the misuse of payment card processing systems to surveil, report, or otherwise discourage constitutionally protected firearm and ammunition purchases within the State of Texas.

SECTION 2. Chapter 271, Finance Code, is amended by adding Section 271.007 to read as follows:

Sec. 271.007. DEFINITIONS. In this Section:

(1) "Customer" has the meaning assigned by Section 59.001, Finance Code.

(2) "Disclosure" means the transfer, publication, or distribution of protected financial information to another person or entity for any purpose other than to process or facilitate a payment card transaction.

(3) "Financial institution" has the meaning assigned by Section 201.101, Finance Code.

(4) "Financial record" means a record held by a financial institution related to a payment card transaction that the financial institution has processed or facilitated.

(5) "Firearms retailer" means any person or entity engaged in the lawful business of selling or trading firearms or ammunition to be used in firearms.

(6) "Firearms code" means the Merchant Category Code 5723 approved in September of 2022 by the International Organization for Standardization for firearms retailers.

(7) "Government entity" means any county or municipality, or state board, commission, agency, bureau, department, or any other political subdivision of the state.

SECTION 3. Chapter 271, Finance Code, is amended by adding Section 271.0071 to read as follows:

Sec. 271.0071. UNAUTHORIZED CATEGORIZATION OF FIREARMS AND AMMUNITION TRANSACTIONS BY A FINANCIAL INSTITUTION. (a) Except for those records kept during the regular course of a criminal investigation and prosecution or as otherwise required by law, a state governmental agency or local government, special district, or other political subdivision or official, agent, or employee of the state or other governmental entity or any other person, public or private, other than the owner or owner's representative, may not knowingly and willfully keep or cause to be kept any list, record, or registry of privately owned firearms or any list, record, or registry of the owners of those firearms.

(b) A financial institution or its agent may not require the usage of the firearms code in a way that distinguishes a firearms retailer physically located in the state of Texas from Texas general merchandise retailers or sporting goods retailers.

(c) A financial institution may not discriminate against a firearms retailer by:

(1) Declining a lawful payment card transaction based solely on the assignment or non-assignment of a firearms code to the merchant or transaction;

(2) Limiting or declining to do business with a customer, potential customer, or merchant based on the assignment or non-assignment of a firearms code to previous lawful transactions involving the customer, potential customer, or merchant;

(3) Charging a higher transaction or interchange fee to any merchant or for a lawful transaction based on the assignment or non-assignment of a firearms code; or

(4) Otherwise taking any action against a customer or merchant that is intended to suppress lawful commerce involving firearms, firearm accessories or components, or ammunition, which action is based solely or in part on the customer's or merchant's business involving firearms, firearm accessories or components, or ammunition.

(d) Except as otherwise required by law, a financial institution may not disclose a financial record, including a firearms code that was collected in violation of this Act.

SECTION 4. Chapter 271, Finance Code, is amended by adding section 271.0072 to read as follows:

Sec. 271.0072. VIOLATION OF UNAUTHORIZED CATEGORIZATION OF FIREARM AND AMMUNITION TRANSACTIONS; CIVIL PENALTY. (a) The Attorney General shall investigate alleged violations of this act and, upon finding a violation, shall provide written notice to any individual or entity, public or private, believed to be in violation of this act. Upon receipt of such written notice from the Attorney General, the entity shall have thirty (30) calendar days to cease the requirement for usage of the firearms code by Texas merchant physically located in Texas.

(b) Either a firearms retailer physically located in Texas whose business was the subject of an alleged violation of this Act or a customer who transacted at a firearms retailer physically located in Texas whose business was the subject of an alleged violation of this Act, may petition the Attorney General to investigate the alleged violation in accordance with subsection (a).

(c) If the Attorney General does not commence an action within 90 days of receiving the petition under this subsection, then the firearms retailer - or customer may file an action in court to enjoin the individual or entity from requiring the firearms code in violation of this Act.

(d) If an individual or entity is found to be requiring the usage of a firearms code by any merchant physically located in Texas in violation of this Act and fails to cease the requirement for usage of the firearms code by any firearms retailer physically located in Texas after the expiration of thirty (30) calendar days from the receipt of written notice by the Attorney General's office, the Attorney General shall pursue an injunction against any individual or entity, public or private, alleged to be in violation of this Act. The Attorney General shall pursue an injunction pursuant to this subsection in court in the judicial district where the alleged violation occurred against the individual or entity in alleged violation of this Act.

(e) If a court finds that an individual or entity continues to be in violation of this Act after thirty (30) calendar days from receiving written notice from the Attorney General in accordance with subsection (a) or from a finding by the court of a violation of this Act in an action commenced under subsection (c), then the court shall enjoin the individual or entity from continuing to require the usage of the firearms code.

(f) If an individual or entity knowingly and willfully fails to comply with an injunction as provided in subsection (e) above within thirty (30) days after being served with the injunction, then the court shall impose a civil penalty in a sum not to exceed Ten Thousand Dollars ($10,000.00) per violation of an injunction issued pursuant to subsection (e), committed after the expiration of the period of thirty (30) days after the entity was served with the injunction. In assessing such a penalty, the Court shall consider factors including the financial resources of the violator and the harm or risk of harm to Second Amendment rights resulting from the violation. Any order assessing a penalty for violation of this Act pursuant to this paragraph shall be stayed pending appeal of the order.

(g) In addition to the remedies provided in this section, the Attorney General or a petitioner who prevails in an action under this section shall recover reasonable expenses incurred in obtaining the civil penalty, including court costs, reasonable attorney's fees, investigative costs, witness fees, and deposition expenses.

(h) It shall not be a defense to a civil action filed under this act that such information was disclosed to a federal government entity, unless such disclosure or action was made based on a good faith conclusion that the disclosure or action was required by federal law or regulation.

SECTION 5. The change in law made by this Act applies only to a violation on or after the effective date of this Act.

Section 6. This Act takes effect September 1, 2023.