Skirting rules could risk credit card use
Pub Date: 11/1/2008
By Gene Huntington,
Administrator
Gambling Control Division
Recently, the Division has received inquiries about the legality of credit card swiping devices and services.
Over the past year, some of the vendors of these services and devices have argued to operators that their services or devices can comply with state rules that limit credit card use to cash advances.
The Gambling Control Division does not have authority to approve or disapprove credit card devices or services.
The Division has offered to advise credit/debit card vendors whether there may be problems with their product.
To date, none of the vendors who have contacted the Division have been willing to provide any further written details about how their product operates or information about the ownership of their businesses.
The Division does, however, have authority to regulate gambling licensees who may purchase or lease the devices, so the operator is responsible for making sure the device/service complies with the Division s rules (ARM 23.16.202):
(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 or agreements with of 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.
In summary, if an operator swipes a card and the transaction is recorded in the customer s account as anything other than a cash advance, the operator has likely violated the agreement with the credit card company or the merchant bank and as a result violated state rules. Typically cash advances come directly from an ATM or a bank. Therefore, cash advances that are made by swiping a card always raise some suspicion.
What constitutes a cash advance? The answer is in the endless supply of offers for new credit cards that you get in the mail.
Those cards are usually accompanied by disclosure summary that spells out what constitutes a cash advance and the interest rate to be paid for a cash advance.
A recent offer I received set out the following description of cash advances that are subject to the 24.24 percent interest rate:
...Cash Advances, Cash Equivalents including the purchase of money orders, foreign currency, and traveler checks from a non-financial institution, person-to-person money transfers, bets, lottery tickets, casino gaming chips, and...fines and bail bonds.
So, if the companies that are selling the swipe devices or services indicate that their products somehow skirt state rules, It's important to remember that the gambling operator will be the one held responsible.
If a customer complains, or an auditor from the Gambling Control Division finds that a transaction violates the merchant bank rules or agreements, or has been recorded as something other than a cash advance, the gambling operator will be cited for a credit gambling violation, and repeat violations will result in an action against the operator s license.
The Montana Tavern Association and the Gaming Industry Association have been very supportive of efforts to control credit card abuse.
These groups understand that by limiting credit card use to the cash advance limit (usually less than $2,000) operators can offer some limited use of credit cards without leading to the financial ruin of compulsive gamblers.
This is a delicate balance that can only be maintained by all gambling operators clearly understanding and adhering to the limits on cash advances. Efforts to get around the cash advance limitation can only lead to an eventual prohibition on the use of credit cards.
The Gambling Control Division has a brochure available that sets out what is legal and what is considered illegal credit gambling.
For copies of the credit gambling brochure or information about credit card transactions, contact Gene Huntington at 444-9135.
Source: The Montana Tavern Times, November, 2008, published monthly by Continental Communications, 125 W. Granite St., Suite 102, Butte, MT 59701.