Stakes rising as courts cancel debts of Net gamblers

Credit card companies rethinking their policies

November 23, 1999|By LOS ANGELES TIMES

From her California home, Cynthia Haines used her computer and a stack of credit cards to gamble on the Internet. With each click of her mouse, money flowed from her credit card accounts into the virtual craps, roulette and blackjack tables of Caribbean cyber-casinos with names like Acropolis and Cyberthrill.

When the banks that issued her 12 Visas and MasterCards tried to recover the $115,000 debt that she'd piled up, Haines sued and hit the jackpot: As part of a settlement reached last month, her credit card debts were wiped out along with a $225,000 lawyer's bill.

Bolstered by old laws -- some dating to the 18th century -- that make gambling debts legally uncollectable in all 50 states, bettors like Haines are going to court to have their online losses canceled.

Their lawyers are going further. They've alleged in lawsuits filed across the country that banks and credit card firms are engaged in racketeering by allowing offshore casinos to process illegal bets on their customers' credit cards.

As Congress debates whether to ban Internet gambling, some credit card issuers are rethinking their policies. Providian National Bank in San Francisco, one of the largest Visa card issuers, says it will no longer process gambling transactions for its 11 million customers. Other card issuers are likely to follow suit. If enough do, that could effectively kill online gambling, observers say, by eliminating the only convenient way to pay.

Of the 14.5 million people who gamble over the Internet, most are U.S. citizens with credit cards. Nearly all pay their bills.

Courts generally side with gamblers when similar disputes over gambling debts crop up with real casinos. Casinos in Las Vegas and Atlantic City, N.J., readily accept credit cards anyway because most gamblers pay up, and credit card issuers continue to allow cash advances in casinos.

But the stakes have risen because online wagering, a new industry with no connection to the casinos, is almost entirely dependent on credit cards.

The credit card companies say the attacks on them are meritless. It isn't Visa's or MasterCard's business to determine whether customers' transactions are appropriate, they say. And charges from online casinos are credit card debts -- not gambling debts.

The gamblers "voluntarily used their credit cards" to wager, said Daniel H. Bookin, a San Francisco attorney for Visa International. "They should accept responsibility for their actions."

Legal experts say it is unclear whether these bettors and online casinos -- mainly located in foreign countries -- are breaking U.S. gambling laws. The 38-year-old federal Wire Act prohibits taking bets on sports by phone or wire, which some interpret to include the Internet. Legislation pending in Congress would clear up that ambiguity by prohibiting all forms of gambling on the Internet.

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