By Katanga Johnson
WASHINGTON (Reuters) - The U.S. gun lobby is taking aim at "gun-hating" banks after Citigroup Inc and Bank of America said they would no longer provide certain banking services to gun-makers, according to industry lobbyists.
The attack by Gun Owners of America and the National Rifle Association (NRA) could imperil de-regulatory gains the banks had hoped to win from Republican lawmakers and regulators, many of whom are staunch defenders of the Second-Amendment right to bear arms, according to industry sources.
In March, Citigroup put restrictions on new retail business clients which sell guns to require their customers to pass background checks, following February's Florida high school shooting that killed 17 people. Weeks later, Bank of America said it would no longer lend to companies that make military-style firearms for civilians.
The gun issue is unlikely to go away as mass shootings grab the nation's attention. Texas officials charged a 17-year-old student with murder in the shooting of 10 people, including fellow pupils, at his high school on Friday.
Gun-control activists and Democrats praised the policy, urging other financial firms to follow suit.
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"We applaud this model of corporate responsibility and we hope that this is the path forward for similar financial entities," said Senators Dianne Feinstein, Brian Schatz and 12 other lawmakers in a letter to bank executives.
But gun owners and manufactures say it encroaches on Americans' constitutional rights and they are fighting back.
Gun Owners of America (GOA), a Washington-based lobby group, has asked lawmakers to add a provision to a draft law rewriting bank rules that it says would prevent "gun-hating banks" from "discriminating" against firearms makers.
The bill reforming the 2010 Dodd Frank act is set to be voted on by the House of Representatives next week.
While financial-industry lobbyists say the bill is likely to pass without the provision on gun-lending, the firearms issue is threatening to turn the powerful gun lobby into an adversary for banks on other regulatory issues longer term.
"Citigroup and Bank of America are threatening our Second-Amendment rights. They do not realize how much more there is to lose than to gain," by their new policies, said GOA's executive director, Erich Pratt.
The group this month wrote to its 1.5 million members urging them to petition House lawmakers to vote against the bill if the provision is not added.
"Our members will take direct action to such discriminatory lending practices by these banks," Pratt added.
Citigroup said its policy does not impact the ability of customers to use their credit and debit cards for the legal purchase of firearms.
"We created standards based not on ideology, but on established best sales practices, which most of the businesses we work with currently follow," said Rob Runyan, a spokesman for Citigroup.
Bank of America declined to comment.
Charles Adcox, a member of GOA, has stopped accepting Citi and Bank of America credit cards at his Missouri gun shop Black River Armory in response to their new policy.
"My more loyal customers don't mind paying in cash. Some even wish to drop their credit-card companies for gun-friendly alternatives," Adcox told Reuters.
The NRA is running an advertisement campaign criticizing Citi and Bank of America online, adding that Citi may be encouraging retailers to violate anti-discrimination laws.
"The NRA will continue to promote awareness of those companies who seek to infringe upon the Second Amendment rights of American citizens," William Brewer, partner at Brewer, Attorneys & Counselors and counsel for the NRA, said in a statement.
"POOR STRATEGY"
Mike Crapo, chairman of the Senate Banking Committee, which writes banking rules and oversees Wall Street regulators, wrote to the chief executives of both lenders in April chastising them for trying to "manage social policy", according to reports.
J.W. Verret, professor of Banking Law at Scalia Law School, said the banks' gun policies appeared to be a "terrifically poor strategy" at a time when they had stood to gain from a political push to cut red tape across the financial industry - potentially reducing their access to lawmakers and regulators.
"There might be a timing challenge in getting that particular provision in this bill but it means that the number of offices that takes Citi's phone calls in the next year or two on the Hill has just been cut in half."
As lawmakers aim to relax banking regulations some 10 years after the 2007-2009 crisis, banking lobbyists have been increasingly active on Capitol Hill.
The Dodd Frank rewrite now being considered in the House would relax lending and capital and mid-size banks, give a capital break to some large banks' custody businesses, and includes a provision that would directly benefit Citi's bond trading business.
(Reporting by Katanga Johnson; Editing by Michelle Price and Alistair Bell)