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  1. #1
    Join Date
    Jul 2016
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    2

    Default Making Chargebacks for Payments to Online Casinos

    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.

  2. #2
    Join Date
    Sep 2005
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    98,846

    Default Re: Making Chargebacks for Payments to Online Casinos

    If you have a specific question about a specific case, by all means ask it. If you want stories, as you can see, there are many stories that you may read by browsing the forum. If you want somebody to promise you that if you choose to gamble illegally you are guaranteed to get your money back if you lose, that's not going to happen.

  3. #3
    Join Date
    Sep 2010
    Posts
    19,901

    Default Re: Making Chargebacks for Payments to Online Casinos

    Most credit card companies and electronic payment companies won't touch anything that looks to be a gambling debt. They usually specifically disclaim permission to use their services for such nor will they apply the dispute resolution to them. It however goes both ways, the banks won't side with the casinos on such either.

  4. #4
    Join Date
    Sep 2005
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    Behind a Desk
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    98,846

    Default Re: Making Chargebacks for Payments to Online Casinos

    Online casinos don't bill credit cards directly. They bill through third party companies that will appear to be legitimate to the credit card company. If the credit card company identifies that type of activity, it will as a matter of routine suspend payment to the third party and try to recover any money already placed in its merchant account. But if a customer comes along, months later, claiming that a charge that they knew was for illegal gambling was an unauthorized charge by the third party, they may find that if the credit card company can't recover the money it will deny the claim based upon their failing to make a timely dispute (written notice within 60 days of the time the unauthorized charge appeared on their credit card statement).

  5. #5
    Join Date
    Jul 2016
    Posts
    2

    Default Re: Making Chargebacks for Payments to Online Casinos

    Quote Quoting Mr. Knowitall
    View Post
    Online casinos don't bill credit cards directly. They bill through third party companies that will appear to be legitimate to the credit card company. If the credit card company identifies that type of activity, it will as a matter of routine suspend payment to the third party and try to recover any money already placed in its merchant account.
    That, in itself, is a violation of MasterCard and Visa's issuer and merchant agreements and is likely to invalidate any attempts the "merchant" makes to fight the chargeback. To simplify virtual transactions in the 3 U.S. states where online gambling is actually legal, MC and Visa created specific transaction codes for legal online gaming activities... if the "merchant" were identifying its transactions accurately, the card companies would immediately block the transaction and not allow any funds to be transferred.

    Quote Quoting Mr. Knowitall
    View Post
    But if a customer comes along, months later, claiming that a charge that they knew was for illegal gambling was an unauthorized charge by the third party, they may find that if the credit card company can't recover the money
    Yes, I believe you are correct here.

    In the hypothetical situation I've laid out, the consumer simply informs the bank that they do not recognize the third-party merchants on their bank statements... the bank representative will ask the customer if they've purchased any electronics/jewelry from China, and the customer will say no...

    In most cases, I don't believe the casino has billed the customer for "electronics" or "jewelry"... it has billed them for an offshore online casino deposit, and unless the casino is extremely savvy, there is no paper trail to prove otherwise (i.e. the casino never shipped any physical merchandise to the consumer).

    It is also extremely likely that based on the consumer's complaint, the bank will identify the activity as fraudulent transactions, and will immediately close the account/re-issue a new credit card to the consumer. The bank will then begin an investigation, and starts by sending the consumer some paperwork to gather additional details... I think a consumer could simply tell their bank to answer the following:

    (i) What kind of products/services were bought from the merchants listed on my statement?
    (ii) Does the merchant have any evidence that these products/services were shipped and delivered to me?

    These two questions alone should nullify any defense the casino attempts to make...

    Quote Quoting Mr. Knowitall
    View Post
    it will deny the claim based upon their failing to make a timely dispute (written notice within 60 days of the time the unauthorized charge appeared on their credit card statement).
    Right- this is all assuming the consumer disputes the charges in a timely manner (typically within 60 days).

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