Credit Card Companies Straddle the Fence
Charles Carreon
In response to the negative momentum in Congress, the credit card companies have performed the predictable maneuver, “banning” the use of credit accounts to make online wagers. But what does this mean? Currently, it means widespread, blatant circumvention of the ban using a silly subterfuge. MasterCard and VISA emblems are still displayed at popular gambling websites, where gamblers use their credit cards to fund a separate “wagering account,” from which they make wagers. Online gambling sites no longer pay back winnings by crediting dollars back to a gambler's credit card account, so this slows down the payment of winnings, a definite minus for consumers. This is basically a dodge by credit card companies to avoid being sued by bettors for attempting to collect “an unlawful debt” by participating too closely in the online gambling business.
THE CYNTHIA HAINES CASE: THE CALIFORNIA RULE
By advising their consumers that they are not to use their credit cards to make wagers, credit card issuers can at least claim “we told you not to gamble with your credit card and you broke the rules,” interposing some kind of legal defense to the claims of disgruntled bettors like Cynthia Haines, who filed counter-claims against her credit card issuer Providian Financial, when they sued her to recover over $70,000 she had gambled away on credit cards over the course of 18 months. By citing a long line of cases that enshrine in law “California's deep-rooted policy against gambling on credit,” Haines' lawyer was able to reach a settlement with Providian pursuant to which it was reported that electronic-cash merchant Cryptologic, Inc. would pay her debt in full. (I have no information on whether Cryptologic, which in 2001 claimed it had processed $7.7 Billion in transactions over the previous five years, really made good on Cynthia's behalf — the case isn't mentioned in the company's 2001 annual report.) After the settlement was made public, Providian declared that if it would reject any charge that it could identify as “originating from an Internet gambling site.” Obviously, to implement this plan, a law requiring card companies to establish that they are not issuing merchant accounts to online gambling sites would mandate the same result; however, there is no telling whether Congress will ever enact such a law.
In response to the negative momentum in Congress, the credit card companies have performed the predictable maneuver, “banning” the use of credit accounts to make online wagers. But what does this mean? Currently, it means widespread, blatant circumvention of the ban using a silly subterfuge. MasterCard and VISA emblems are still displayed at popular gambling websites, where gamblers use their credit cards to fund a separate “wagering account,” from which they make wagers. Online gambling sites no longer pay back winnings by crediting dollars back to a gambler's credit card account, so this slows down the payment of winnings, a definite minus for consumers. This is basically a dodge by credit card companies to avoid being sued by bettors for attempting to collect “an unlawful debt” by participating too closely in the online gambling business.
THE CYNTHIA HAINES CASE: THE CALIFORNIA RULE
By advising their consumers that they are not to use their credit cards to make wagers, credit card issuers can at least claim “we told you not to gamble with your credit card and you broke the rules,” interposing some kind of legal defense to the claims of disgruntled bettors like Cynthia Haines, who filed counter-claims against her credit card issuer Providian Financial, when they sued her to recover over $70,000 she had gambled away on credit cards over the course of 18 months. By citing a long line of cases that enshrine in law “California's deep-rooted policy against gambling on credit,” Haines' lawyer was able to reach a settlement with Providian pursuant to which it was reported that electronic-cash merchant Cryptologic, Inc. would pay her debt in full. (I have no information on whether Cryptologic, which in 2001 claimed it had processed $7.7 Billion in transactions over the previous five years, really made good on Cynthia's behalf — the case isn't mentioned in the company's 2001 annual report.) After the settlement was made public, Providian declared that if it would reject any charge that it could identify as “originating from an Internet gambling site.” Obviously, to implement this plan, a law requiring card companies to establish that they are not issuing merchant accounts to online gambling sites would mandate the same result; however, there is no telling whether Congress will ever enact such a law.