Cash advances abused for gambling purposes
Pub Date: 1/1/2003
The Gambling Control Division (GCD) composed an "issues paper" on increasingly blurred areas of the credit gambling prohibition statute. The division cited a case where numerous cash advances from a credit card were obtained apparently for gambling, which on its face would be completely legal.
However, cash advances were not authorized under the conditions stipulated for that particular card, and the location had been charging the cash advances as "merchandise," a practice that violates the merchant agreement between the party accepting the card and the entity that issued it. Nor did the card authorize advances for gambling purposes.
The card owner protested the charges, noting the cash had been used to gamble, and the credit card company disallowed them. The licensee then tried to collect the charges from the card holder which action, in the opinion of the GCD, should be a per se admission of a violation of the credit gambling prohibition statute.
In the issue paper, the division proposed eliminating the use of credit cards altogether in licensed gaming establishments. Representatives of the gaming business, however, pointed out that credit cards are a legitimate device to make legitimate purchases of merchandise such as food and beverage and are allowed to be used for cash advances for gambling, as long as their is no violation of the card holder/card issuer/merchant agreements.
It was noted that some card agreements specifically allow them to be used for gambling, but that often those charges carry a higher interest rate, as do cash advances, adding another wrinkle to the conundrum.
Earlier, a gaming business spokesman acknowledged that the case being considered by the GCD was problematic and quite likely a violation of some kind, insisting that this practice needed to cease and that any licensee operating this way should be prosecuted.
That point was amplified by councilman John Tooke of the Golden Spur in Miles City. He said, "If an operator is trying to circumvent the merchant agreement, he deserves to eat the charges. If he tries to collect them, he is in violation (of the credit gambling statute) and should be prosecuted."
But council member Steve Morris, owner of Jorgenson's in Helena, said there was some worry that credit card users could simply tell their card companies that bona fide charges for lodging, meals or merchandise were instead for gambling, which might prompt the card company to disallow those charges, leaving the merchant cheated and holding the bag.
Gambling Control Division Administrator Gene Huntington countered that there are plenty of federal regulations that deal with disputed credit card charges and protect the innocent merchant.
Cort Jensen, a specialist in credit card transactions and assistant attorney general, said disputing credit card charges has a low success rate.
Councilman Tim Carson, President of Billings gaming machine manufacturer Summit, said a notice sent to licensees clarifying that card charges needed to accurately reflect actual transactions, and that misrepresented charges could be disallowed with no collection recourse for the establishment, might be enough to resolve the problem without going to the rules process.
Carson also noted that sellers of credit and debit card systems have been known to misrepresent the discretion merchants have in assigning charge categories to transactions.
Mark Staples, attorney and lobbyist for the Montana Tavern Association, noted, "Licensees can't be put in the position of trying to guess "what part of a legitimate $100 cash advance is going toward gambling versus food, drink or walking around money. we've got to be careful, here," he said.
The division's issue paper further suggested re-examining the statutes regarding whether a customer of a licensed business could "buy back" a check before it was deposited at noon the following day.
Rich Miller, executive director of the Gaming Industry Association (GIA), recounted the arduous and "sometimes acrimonious" deliberations that ironed out that complex issue almost 12 years ago, and suggested that statute works well and ought not to be meddled with.
Huntington concluded that more research into modern financial transactions technology and agreements would help clarify the division's position, and would result in a more constructive issues paper to be ready before the next council meeting in January.
[ i] Source: The Montana Tavern Times, Oct. 2005, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.[/i]