By Gene Huntington, Administrator
The Gambling Control Division
The Gambling Control Division has recently had questions about the practice of gaming operators running credit cards to provide customers with cash for gambling.
Cash advances are legal if they are represented as cash advances and do not otherwise violate the credit card company' merchant agreement. Cash advances can generally be obtained from an automated teller machine (ATM) that will automatically limit the amount anyone can be advanced.
A cash advance issued by running the customer's credit card and representing the advance as the sale of goods or services raises the possibility that the establishment is trying to get around the customer' cash advance limit, or is trying to help the customer avoid higher interest rates or fees associated with cash advances.
A few years ago the Division enacted new rules to prohibit various practices employed by operators to get around the limits on cash advances for gambling. The rules provided:
"(3) Any debt resulting from a credit card transaction to obtain cash for the purpose of gambling may not become a debt owed to the licensee, be assigned to the licensee or be assigned or sold to a collection agency acting on behalf of a licensee. Debt resulting from a credit card transaction to obtain cash for the purpose of gambling may only become debt owed to the financial institution issuing the credit card.
" (4) No licensee may accept credit cards for cash advances for the purpose of gambling by representing the transaction as a sale of merchandise, gift cards or in any other way that would violate the rules of, or agreements with, the issuing merchant bank or credit card company. Any attempt by a licensee to collect credit card charges from a cardholder made in violation of credit card rules or regulations will constitute a violation of the public policy against credit gambling."
Many times parents or spouses of compulsive gamblers contact the Gambling Control Division after their family member has incurred huge credit card debts. When possible the Division investigates this information to determine whether the debts resulted from credit gambling violations.
The limit for cash advances on personal credit cards is usually no more than $5,000, so the question then is how do people incur gambling credit card debts of $50,000 or more? Anecdotal information suggests that operators give customers cash advances but run the transactions as the sale of goods or services or something other than a cash advance.
The law prohibiting credit gambling is intended to prevent gambling practices that can lead to a customer' financial ruin. In enacting this prohibition, the legislature tried to protect those who are compulsive gamblers while maintaining the stability of the gambling industry.
Studies have shown that limited access to credit is one of the most important steps that regulators can take to curb problem gambling.
The Division will again be circulating a credit gambling brochure to all licensees. If you have any questions about credit card transactions, please contact me at 444-9135.
Source: The Montana Tavern Times, September, 2007, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.