My question involves collection proceedings in the State of: New York (NY)
I want to have a comprehensive discussion of a bank/credit card company's responsibilities and obligations when it comes to online gambling transactions (presumably between an online casino based internationally, and a U.S. citizen living in a non-UIGEA safe harbor state... ie, any state other than Delaware, New Jersey, or Nevada).
I have read virtually every thread on expertlaw.com regarding online casino charge-backs. I have also researched 100s of other webpages for 3rd party payment processors (money launderers to online casinos), credit card agreements, anti-chargeback services, casino affiliate programs, etc.
In my opinion, it is very difficult for a consumer to lose a chargeback dispute with an online casino, and the bank is likely to refund the money in nearly every case. I would like to hear arguments, opinions, or stories from you supporting why you agree/disagree with me.
Here is my rationale:
The UIGEA makes it illegal for the following entities to facilitate payments in connection with online gambling transactions:
(i) the operator (i.e. the casino)
(ii) the payment processor
(iii) the debit/credit card issuer
(iv) any depository institution (read: BANK)...
Notice that the PLAYER him/herself is the only one who does not have legal liability, and correct me if I am wrong (which I could be), but not a single U.S. citizen has ever been prosecuted for online gambling. Why? Because participating as a player in online gambling is not a crime under the UIGEA.
Why do banks and CC companies allow consumers to make payments to online casinos? It's simple- the bank isn't aware that the money is being laundered to an offshore online casino via a fake business entity. The casinos own, operate, or collaborate with shell companies that are disguised as foreign electronics retailers or jewelry stores, and from the bank's end, the consumer is simply purchasing some physical goods from China. If the transaction was accurately coded as gambling, the bank obviously would deny the charge.
In most cases, these charges show up on a consumer's statement as some unrecognized Chinese retailer. Oftentimes, they are for an amount that is slightly different from the amount authorized by the consumer. In these cases, the consumer can simply call up the bank and file a dispute. There are many reasons for a dispute, and I've outlined a few of the relevant ones below:
a. Not as described or defective merchandise
b. Transaction not recognized
c. Incorrect currency or transaction code
d. Incorrect transaction amount or transaction amount differs
e. No cardholder authorization (the cardholder didn't recognize the transaction or billing descriptor)
f. QUESTIONABLE MERCHANT ACTIVITY (the merchant processed a transaction that was in violation of MasterCard/Visa rules)
g. Services not provided and merchandise not received
As you can see, and based on how the casino charges your card, the dispute codes above are extremely applicable and can be truthfully and legally claimed/filed by a consumer with their bank or CC company.
Once the bank begins its investigation, it will be very difficult for an online casino to successfully fight these chargebacks for one very important reason: they have no means of proving that you received any good/service from the types of merchants identified on your bank statement. And in the event the casino informs your bank they are 'doing business as (d/b/a)' a Chinese electronics store, but actually operating an online casino out of Panama, your bank is extremely likely to reverse process the chargeback, as they do not want to run the risk of violating the UIGEA (which they technically have already done). I am not certain if the bank is legally required to process the chargeback, but I would bet that in most cases, they will process it immediately without question (unless it is an extremely large sum of money).
In my view, these are the highest probability outcomes of an online gambling chargeback (in no particular order):
(1) Bank tries to contact the merchant, but the merchant does not contest the transactions. Outcome: bank charges back the transactions and refunds the consumer.
(2) Bank contacts the merchant, and the merchant provides flimsy evidence (i.e. a confirmation email or receipt) that the consumer indeed purchased the merchandise shown on their bank statements. Outcome: consumer rebuts that he/she didn't receive the specified merchandise, and doesn't recognize the merchant at all. Bank charges transactions back and refunds the consumer. The consumer will ALWAYS have a massive advantage here, because in all likelihood, the casino/shell company already has an extremely high chargeback rate (which would suggest they are high-risk, and somebody the bank/CC company shouldn't be doing business with in the first place).
(3) Bank contacts the merchant, and the merchant provides stronger evidence that the transactions are legitimate (i.e. pictures of consumer's photo ID, physical credit cards, and potentially an authorization form filled out by the consumer giving the casino permission to charge the consumer's CC). For example, a friend of mine who gambles online was required to fill out an authorization form before withdrawing his winnings. The authorization form gives the casino permission to charge his CC... but it makes no mention of (i) whom the casino is doing business as, (ii) the specific amount to be charged, nor (iii) the fact that the casino may charge him through an alternate non-casino business entity. In this case, the consumer will simply admit they were gambling online, but maintain that they do not recognize the merchants or the amounts on their bank statement. And again, this lets the bank know that it has unlawfully funded online gambling transactions with is expressly prohibited under the UIGEA.
Ultimately, I don't think the casino has any recourse because it is knowingly in violation of the UIGEA. The casino can't legally sue you or financially threaten you. And as the consumer, you are not being dishonest or committing any type of fraud, because presumably, you legitimately do not recognize the merchants on your bank statement and can truthfully state to your bank that you have never done business with those merchants, nor have you received any goods/services from them.
I would like to hear your rebuttals, opinions, and examples/anecdotes/stories of alternative or unfavorable and/or unsuccessful outcomes stemming from an online casino chargeback initiated by a consumer.