Posted by
ryuzaki0
on from the how-to-cut-your-losses dept.
ShawnD writes "A California woman has gotten out of a $70,000 on line gambling debt by claiming that the 'loan' from Visa was illegal (California apparently frowns on loaning money for gambling). The judge agreed.
See this article at ZDNN."
Ob-McDonalds-case-reference
by
Anonymous Coward
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· Score: 2
The McDonald's case is interesting.
The coffee, maintained at a scalding 180F-190F because the customers supposedly "like it hot", caused severe third-degree burns. She spent seven days in the hospital and was treated with skin grafts.
Initially she only wanted payment for her medical bills but McDonald's refused to even negotiate with her. Consequently she contacted an attorney who had settled another coffee burn case with McDonald's. In the course of the trial company documents revealed that "in the past decade McDonald's had received at least 700 reports of coffee burns ranging from mild to third-degree, and had settled claims arising from scalding injuries for more than $500,000."
Despite knowledge of the hazard, company officials refused to warn its customers. "There are more serious dangers in restaurants." And given the 1 billion cups of coffee sold annually, McDonald's considered the number of burn complaints to be "statistically insignificant".
After hearing such testimony a jury found McDonald's liable and awarded $200,000 in compensatory damages. The jurors deducted $40,000 for contributory negligence. Also, given McDonald's conduct, the jury awarded $2.7 million in punitive damages, which was equal to 2 days of coffee sales.
Later the judge reduced the punitive award to $480,000. While awaiting appeal the two parties settled out of court for an undisclosed sum.
The #1 sickening thing about the whole McDonald's coffee hype is how it distracts from the facts. I suppose you just glibly believed whatever it was the mass media told you about that McDonald's case didn't you?
Lawyer: This is basic, ancient, law
by
hawk
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· Score: 2
Disclaimer: I am a lawyer, but I'm probably not licensed in your jurisdiction. This isn't legal advice, anyway. If you need legal advice, see an attorney licensed in your jurisdiction.
The only thing surprising about this is that it took so long to happen. In fact, this was my initial reaction to the use of Visa for these places.
Using a Visa or MC for *anything* creates a loan. It is also a contract. Courts have refused to enforce contracts that violate public policy for as far back as the Common Law records cases. You also can't sell yourself into slavery, nor consent to be murdered.
Nothing prevents the transaction if everyone agrees to it. But when a party enters the courtroom, they are asking the court/government to enforce the contract.
Gambling contracts are a particular type that courts commonly refuse to enforce. California's constitution specifically prohibits the legislature from legalizing gambling of the type seen in Nevada casinos. The public policy is explicit.
When a Nevada casino issues a loan, it is aware that it can't enforce the loan in California. For that matter, it couldn't even be enforced in Nevada until the late 1980's.
McDonald's kept coffee extra hot because it was convenient to them. They could pour cups beforehand and not have them get cold while sitting around. No other fast food place had coffee that hot, despite the fact that they presumably have the same customers. So, McDonalds had coffee too hot, had been warned about it many times so in this case it was issued a stiff punative judgement to get them to change their behavior, which they did.
I don't find McDonalds coffee to be too cold now, others may disagree but I doubt it's 999,999,999 out of a million as you suggest. The coffee tastes like shit, but that's a different story.
That's not to say I don't agree that frivilous lawsuits or at least the fear of frivilous lawsuits is invconvenient for companies and consumers. After all, if a few people hadn't gone and died from bad Jack In the Box beef, I could still get a decent medium rare burger. C'est la vie. --
How is Visa to know what the card is being used for? All they can possibly know is what merchant is charging the card and for how much (well, that's all they can possibly know while still maintaining some semblance of legality, at any rate). Last I checked, they bear no respobsibility for what you do with the card. As a matter of fact, since this woman used her "loan" for an illegal purpose of which Visa wasn't aware, you might be able to say she committed fraud.
Sure, credit cards are a form of loans. However, Visa did not lend her the money so she could gamble with it. They did not know what was going on, so I don't think they should be held liable for this in the least. This idiotic woman should have to pay every last cent of that gambling debt. She chose to play, after all, and it's no one's fault but her own that she messed up.
Re:What would happen if she actually won anything?
by
rew
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· Score: 2
Suppose she won. Could the 'gambling establishment' refuse to give her the winnings on the grounds that she used an illegal loan?
The way to WIN on gambling $70.000 is by doing at most a few bets. If you place 7000 $10 bets, the chances are pretty slim(*) that you will "win".
(*) slim as in happens once in the lifetime of the universe if someone tries the experiment every second.
Here in the netherlands, the odds on some bets are acutally fair. Betting red/black on the roulette table gives you a 50/50 bet. Betting a number gives you 1/37 chance * 36 payback, so you lose on every bet. The red/black rules are such that you get exactly 1/2 * 2 return.
The reason the casino can still make a profit is that people have credit limits. Either in "money in wallet" or on their credit card. That means that you can bet until you're broke. There is a 100% chance that you can "bet till you're broke". If you start with $100 there is a 50/50 chance that you'll end up with $200 before going broke. Many, MANY gamblers will continue "because they are on a winning streak". That means that the stakes for the casino just doubled for the casino ("Yeah right"), but the person still has a good chance of going home broke.
If you really want to make money against the casino, you should go to the casino with $100 in your pocket and leave (or at least stop betting) when you're $10 ahead. There is about a 90/10 chance that you'll leave the casino with more money than you started out with. But the 10% chance is that you'll have lost $100, and the 90% chance is that you'd have won $10.
Roger.
Re:The credit card company will still have revenge
by
PD
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· Score: 2
Visa will chargeback the gambling sites, and they will also 1099 the delinquent woman.
Visa doesn't want to lose any money if they can't help it, and their ongoing business relationship with the gambling houses allows them to chargeback the full amount. If the gambling houses don't like it, then they don't have to accept VISA, now do they?
No matter where Visa gets its money from, the woman received $70,000 of income that she spent how she pleased. She owes taxes on it.
I'm not a lawyer either, but I have consulted for credit card companies, and that's how I know.
What's kind odd is that the comment got a score 0:Troll. So someone actually moderated it up (otherwise it would have been score -1: Troll). In theory, MetaModeration is supposed to make up for that, but obviously it's far from foolproof.
D
----
LINK: The Register's take on this case (funny)
by
warlock
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· Score: 2
Re:What would happen if she actually won anything?
by
Dredd13
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· Score: 2
VISA is international, there are god knows how many weird or even contradicting laws, hence its not only ridiculous, its impossible for them to filter transactions.
So if Citibank is International (it is), they are no longer required to know and obey the banking laws in the places they do business?
That is the "price" of being a large international company -- you have a team of lawyers, in-house and on-retainer, whose job it is to know the various laws that affect the way you do business in the many places.
Now, what happened is that credit cards companies have to differentiate between "purchases" (for goods and services) and "cash advances" (for anything else). The rules between the two are widely different in the way the card companies are allowed to behave.
In many states, such as California, you may not use a credit card for gambling purposes.
Now, some will say "she did a cash advance", but that's not what happened. A cash advance is like going to an ATM machine, you surrender your card, someone draws cash against your card and hands it back to you. (In fact, the most common place for credit card cash advances IS the ATM machine, with local banks being a close second). Most credit card authorization agreements strictly forbid the merchant from performing cash advances (hence you can use your ATM card to do "$20 over" at the grocery store and get change, but they won't let you do that with your Visa card because that would be a cash advance).
Her contention appears to be: This wasn't a cash advance, because no cash entered my hands, and it couldn't have been a charge, because credit card charges for gambling are illegal in California.
Is the law dumb? Yes. You should be able to spend your money or ruin your credit rating on whatever you want to. This is still (supposedly) a free country.
Did Visa violate the law? Absolutely, as is MasterCard probably. Most of them don't bother to do the kind of fine-tuning they need to on their card acceptance routines.
Now, if she had WON, the casino could have turned the tables and said "You fraudulently used a credit card to obtain funds" and reneged (legally) on paying her winnings.
Of course VISA can regulate the use of the card -- they're the ones loaning you money. it's their money, and if they decide one day that you won't be able to charge anything at Sears, then you better have another card in your pocket if you want to buy something at Sears.
And if you want to buy something that's illegal, VISA better have a check in the system to not authorize the purchase, since they know they won't be able to collect. this is not new, or specific to E-commerce, it's long-standing law that contracts in which one party is engaging in illegal activity have no binding. That's why a hooker can't take a john to court if he doesn't pay (but you'll probably visit the ER sometime soon)...
-- Recursive: Adj. See Recursive.
Re:Ha ha! Only in California (aka, the left coast)
by
NMerriam
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· Score: 2
In all likelyhood, VISA will simply charge-back the gambling group. if the gambling group wants to keep their ability to process VISA cards in the future they'll live with it (and operating e-commerce means taking credit cards or going out of business, so I suspect they'd like to keep the account).
That's how it works, and why VISA and MC are generally able to write off things like this without a big hassle. i've gotten charge-backs for all sorts of things, from malicious retailers who deliberately tried to screw me to people who just send the wrong item. One call to your credit card company will usually have the merchant screaming "uncle".
the net result of this will not be a "chilling effect on the growing online economy" but the gambling group taking more care to ensure they're dealing with legal gamblers -- just remember that at the end of the day, the house ALWAYS wins:)...
A law is a law; judges exist to uphold the law. The theory this country's legal system is that it is run by laws, not judges, as much as possible.
I agree with spirit of your post. Too many times the law is overlooked by judges and juries around the country. Judges and juries tend to make decisions by how the feel about it, and not sticking to the law. A perfect example is Roe V. Wade, but lets not go there shall we?:)
So let's look at this. If it's not legal in California to give loans for gambling, then if you loan someone for gambling, IT'S ILLEGAL.
I'm not sure that the article said that it was illegal, only that courts in California "frown upon" loans given out for the purpose of gambling.
And despite the way people VIEW credit cards, any purchase you make on a credit card IS A LOAN.
While IANAL, I would have to question whether a purchase on a credit card is actually a LOAN per se... Credit cards are more like overdraft protection at a bank, except that you never have a balance. If she had written a CHECK for $70,000, and, assuming she could get that much overdraft protection (not likely, but this is a hypothetical situation:) would you fault the bank for giving her loan?
The fact that the transaction was automatically by a computer does NOT make it legal in any way
Agreed. But for a law to be effective, it has to be enforceable. For instance, the CDA, which made it illegal to allow minors to view "harmful" material on the Internet, was struck down and one of the reasons was that the law was not enforceable (besides the fact that it was too broadly worded). How would you expect the credit card company to police itself against "making a loan" to Californian online gamblers? Should they simply not do business with online casinos? What about the people in other states where loans to pay for gambling aren't illegal? Sounds like this judge is looking for a good way to effectively end online gambling.
Personally, I would say that the California law, or at least this ruling, is unconstitutional, perhaps in violation of the first amendment. You could make the case that online gambling is a form of expression and that supressing that expression is censorship -- hence in violation of the first admendment.
So which law do you think the judge has a higher obligation to uphold? The law about not making loans to gamblers or the First Amendment to the Constitution of the United States of America? I think the answer is pretty clear.
Re:Is the woman not an accessory to crime, then?
by
MindStalker
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· Score: 2
Much of the law has to do with the fact that someone can't loan money with the knowledge of the fact that it is going to be used for gambling. You might try to make the instantanius argument that Visa had no way of knowning what the money would be used for, and such and such. But that would be a blatent untruth. Visa, or any other credit card company has the right to dissapprove of any merchant from using its service. So if Visa had stopped and considered the law, it should either not allow merchants which offer gambling to accept their credit cards. Or make very specific deals with such merchants as to only accept cards from certain states. This was an oversight on visa part, and it is the one to blame. NOT that I don't think the lady should be SMACKED around a bit:) but on a purly legal status, its still Visa's problem. Though if Visa is smart it will refuse to pay the Online Casino, which is something that by contact Visa usually has the right to do. And in all honesty I'm not about to feel sorry for the Casino for loosing its money:)
This ruling has a precedent
by
sirwired
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· Score: 2
It has long been the policy of the State of California to not enforce gambling debts. Even if this woman had traveled to Vegas, and blown her credit card while in Nevada, her bank would be prevented from attempting to collect while she was a resident of California.
The precedent for this is Hamilton v. Abadijian which states "The owner of a gambling house who honors a check for the purpose of providing a prospective customer with funds with which to gamble and who then participates in the transaction thus promoted cannot recover on the check." While this doesn't mention credit cards, it is naturally extensible to them. If you went to a Vegas casino, you can be damned sure they won't take a credit card or a check if you are from Calif.
The grounds for such a ruling is that it is against the laws of California to allow gambling, and therefore debt incurred while gambling is uncollectable within California. The contract to pay said debt enables an anction which is illegal, and contracts to carry out an illegal action are unenforcable. It should be noted that it would also be perfectly legal for the online gambling house to refuse to send any winnings to California since the contract is unenforcable, no matter who owes what to whom.
The judge had no choice but to make this decision, as the law is fairly simple and straightforward. While not every state has laws against gambling (or they might have special laws stating that out-of-state gambling debts are legal), there is not a state in the US that will enforce contracts for conduct that is illegal within its borders.
The moral of the story: The online casino should have done its homework, and looked up this woman's address first.
Re:Even so, her credit history will look pretty ba
by
coyote-san
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· Score: 2
And what, exactly, do you expect to the credit report to state?
Remember, Visa *settled*. The matter is closed, and they can't report that the woman didn't pay a lawful debt. (Note the key word "lawful.") They can't list the debt as unpaid during the time the charges were challenged.
Could they still manage to put a barb in the credit bureau report? Sure... and it would seem to be a slam dumk for slander because the case has already be brought before a court and Visa settled.
-- For every complex problem there is an answer that is clear, simple, and wrong. -- H L Mencken
Re:Ha ha! Only in California (aka, the left coast)
by
Mr.+Slippery
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· Score: 2
Who says coffee has to be so cold that you can drink the whole cup instantly without getting burns?
Who says french fries have to edible at the time of purchase and can't be coated with a volatile poison that's going to evaporate in a few minutes?
When you sell a prepared food product, the implied warranty is that it is fit for immediate human consumption. For hot beverages, that may not imply "that you can drink the whole cup instantly", but it does imply that it won't give you third degree burns!
(A friend of mine is currently involved in a lawsuit after she was poisoned by coffee containing toxic cleaning chemicals. I suppose your response is that she should have had it checked by a toxicologist before drinking it - who says coffee can't contain poison? Consumers have a choice, after all...)
And finally... It's pretty dumb to hold HOT coffee cup between your legs.
Which is probably why the jury reduced the award for contributory negligence on the part of the burn victim.
-- Tom Swiss | the infamous tms | my blog You cannot wash away blood with blood
Re:Ha ha! Only in California (aka, the left coast)
by
Mr.+Slippery
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· Score: 2
Rack up $70,000 in debt gambling illegally over the 'net? Stick the credit card company with the bill!
Visa's not stuck with the bill - according to the article, they're going to collect from the casinos.
I'd have to say this is a case of "there is no honor amoung con men" - casinos though they could cleverly get around the law by going online and offshore, and this woman turned out to be more clever at getting around the law.
-- Tom Swiss | the infamous tms | my blog You cannot wash away blood with blood
The precident that this case sets can potentialy be very damaging to the (still very young) ecomerce segment of our economy. What it says is: It's not payed for till it's payed for. It's not sold until it's sold. It's not a deal unless the check is in hand.
Visa, in this case, is wrongfully left holding the (70k) bag for this user. If I worked in risk managment at Visa, I would be very hesitant about offering services to on-line companies that could potentionaly open the comapany up to such exposure.
If I was a user, and unknowingly charged a 6 pack of Linux Xeon servers from Dell.com and mayed the argument that "I thought those little pull down menus were a tetris game!" Would a simprethetic judge leave Visa holding my bill for my new . . ..wait for it . . Beowolf cluster?:)
Remember this is a California Law against the gambling loan, so it wouldn't apply in Vegas.
On a side note, in Texas it is illeagal to sell the state's lottery tickets on a credit card, but debit cards are OK since they aren't a loan.
You also need to keep in mind that the ATM's are giving cash advances, with all the extra fees etc, and cash is then cash.
This probally wouldn't be an isolated case (although in TX the courts are probally more conservative than in CA).
Why Visa should have known better!
by
breser
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· Score: 3
Credit cards can be used in some jurisdictions to charge money used in gambling. In some you can't. However, how the credit card companies deal with these charges is what is important here. Charges for gambling are counted as cash advances against the account NOT as a regular charge.
This is accounted for via SIC codes (Standardized Industrial Classification). Each merchant account has one associated with it. Unless the merchant lied about what they were selling the SIC code would have clearly indicated it was for gambling.
So since they had the knowledge of that it was gambling, were already doing special processing on the charge, and had the individuals address, Visa should have blocked the charge!
While I don't think this woman should have sued Visa, I can see how she could manage to get them to settle.
P.S. IANAL but work within the ecommerce industry so I'm familiar with how the credit card system is setup
It's really unfair to bash the judgement here. A law is a law; judges exist to uphold the law. The theory behind this country's legal system is that it is run by laws, not judges, as much as possible. So let's look at this. If it's not legal in California to give loans for gambling, then if you loan someone money for gambling, IT'S ILLEGAL. Wow. And despite the way people VIEW credit cards, any purchase you make on a credit card IS A LOAN. That's the reality, even if most people don't THINK about it that way. And since it's clear to the credit card company that the money is going to a casino, it's obvious that they're LOANing the woman money TO GAMBLE WITH. The fact that the transaction was automatically handled by a computer does NOT make it legal in any way. It isn't about what the company could do, or whether it was intentional. If you break the law and don't know about it, you've still broken the law. That's why large companies hire lawyers. IANAL of course (lawyers on Slashdot? don't make me laugh) but this decision seems completely reasonable to me. The woman's motives are irrelevant. "Common sense" means the opinion of a large majority of people, and is also irrelevant. If you don't like this decision, direct your wrath at the LAW. If you live in California, write letters to your politicians. Sitting around whining about how stupid the "system" is, when all the system has done is uphold the law, is just pointless.
-- I have seen the future, and it is inconvenient.
Go to your nearest burn unit and ask them if they would call "190F" liquids "hot".
*NEVER* make the mistake of thinking that the "temperature" shown by a thermometer has any direct correlation with the potential damage to human tissue. A child or elderly person can be scalded with water not much above 120F, and even a healthy adult can be scalded by water over 140F.
190F will scald anyone. 190F is *boiling water* in these parts. (Well, in the mountains to the west; in Denver water boils at around 200F). Anyone who quickly drank that coffee would require medical attention for severe burns in their mouth and throat... and at least they could vomit it out. The woman involved in the suit had the hot liquid dumped onto clothing which held it against her skin.
(Before you comment that anyone dumb enough to drink something that hot deserves what they get, what about people who have lost most feeling in their hands? *You* might be able to feel the heat through the cup, but many people will feel nothing or only mild warmth.)
I could understand that one particularly dumb manager didn't understand the consequences of keeping his coffee around 20F hotter than everyone else, but the plantiff's lawyers showed that McDonald's knew it was causing injury *and* refused to accept responsibility for those injuries.
-- For every complex problem there is an answer that is clear, simple, and wrong. -- H L Mencken
Re:Ha ha! Only in California (aka, the left coast)
by
Mr.+Slippery
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· Score: 3
Oh, not the damn McDonalds coffee lawsuit again. Look, the woman recieived third degree burns, and required skin grafts. They had previous complaints - hundreds of them - that their coffee was dangerously hot. They sold a product that was unfit for human consumption; it would have seriously burned your mouth if you tried to drink it at the temperature offered. And the woman orginally only tried to recover medical costs, but McDonald's wouldn't even negotiate.
There are plenty of bogus personal injury lawsuits out there. (I was hit by one myself after a fender bender a few years back, and despite the utter lack of any real case on the plaintif's part my insurance company decided it was cheaper to settle than go to court.) But the McDonalds coffee lawsuit wasn't one of them.
-- Tom Swiss | the infamous tms | my blog You cannot wash away blood with blood
Clearly gambling is a mental disease in cases like this. Can anyone really fail to understand that casinos, electronic or otherwise, are not in the business of giving away money to the persistent? You have to deny reality very powerfully to invest $70k in an effort to show otherwise.
Letting this woman off without at least mandatory therapy is no service to her or to society. I hope she gets help.
I blame the CC company for settling. And not it specifically, but corporations in general. If you wonder why everyone and their brother is suing, the answer is simple -- because it works. As long as court will cost the corporation more than you are asking they'll settle. Principle is not a word in their vocabulary without a bottom line to back it up.
I'm amazed they didn't require non-disclosure in the settlement, that's usually part of the deal. Especially when problems are found in a product that might cause a recall if generally known. Here I expect a lot of copycats trying the same trick, so I wonder if they will continue to settle further cases?
Apparently they are putting the responsibility to check origin of customers on the offshore gambling sites. This seems equivalent to telling them to close their doors. Certainly the credit card companies are more likely to know where the customer lives and what credit law is like there.
I spent several years working in casinos in Atlantic City. The credit card companies have machines similar to ATM's that allow you to obtain cash from your credit card within ten feet of the casino floor. I suppose they're not there specifically for gambling purposes though:)
The judge didn't rule that VISA and MasterCard was at fault and that she was right. The Creditcard campanies settled with her. Settlements happen outside of the courtroom.
In other words, VISA AND MASTERCARD DECIDED NOT TO FIGHT HER!!
This event is a showcase of the general malaise of this country. If you blew 70 grand in VEGAS you would get no forgiveness. However, some crackpot blows the same amount ONLINE and is immediately forgiven by an equally incompetent judge. Calling the credit card a "loan" doesnt quite work. This event sets a rather unfortunate precident for the future, meaning that I wouldnt want to get into the online casino business any time soon.
-- "Dancing is the vertical expression of a horizontal desire" --Robert Frost
The credit card company will still have revenge
by
PD
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· Score: 5
After 3-5 years of non-payment, the credit card company will forgive the debt owed to them by their delinquent customer. The customer at this point usually thinks that they are off the hook, scott free.
BUT, an unpaid loan turns into *tada* INCOME! This income becomes TAXABLE! So, once the debt is forgiven, the credit card company turns in their customer to the IRS, and the customer suddenly finds themselves with a tiger on their tail. A much bigger tiger than a credit card company.
The woman who got the $70,000 forgiven now owes about half that amount to the IRS, plus late penalties, fees, and interest.
I'm really surprised that the article didn't mention that, but maybe not too many people know about it.
What would happen if she actually won anything?
by
warlock
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· Score: 5
I mean, VISA loans her money for gambling, she looses, she sues, VISA doesn't charge her (duh).
Suppose she won. Could the 'gambling establishment' refuse to give her the winnings on the grounds that she used an illegal loan?
Still trying to get my head around this ridiculous judging.
Now I'm not a lawyer, but when you apply for a loan, you usually are asked to specify the reason - if you put "Gambling" then the bank should refuse it if its illegal... if you however put "general expenditure" and go about gambling, why on earth would the bank be held liable for that? Besides VISA accounts are not really loans, they're more like a general expenditure overdrafts.
VISA had knowledge of where the money was going, but stop and think for a while: VISA is international, there are god knows how many weird or even contradicting laws, hence its not only ridiculous, its impossible for them to filter transactions.
Oh well. I guess they could just add another disclaimer in their next version of the contract. Yet another proof that the US legal system needs a healthy dose of common sense.
Slashdot Mirror
The McDonald's case is interesting.
The coffee, maintained at a scalding 180F-190F because the customers supposedly "like it hot", caused severe third-degree burns. She spent seven days in the hospital and was treated with skin grafts.
Initially she only wanted payment for her medical bills but McDonald's refused to even negotiate with her. Consequently she contacted an attorney who had settled another coffee burn case with McDonald's. In the course of the trial company documents revealed that "in the past decade McDonald's had received at least 700 reports of coffee burns ranging from mild to third-degree, and had settled claims arising from scalding injuries for more than $500,000."
Despite knowledge of the hazard, company officials refused to warn its customers. "There are more serious dangers in restaurants." And given the 1 billion cups of coffee sold annually, McDonald's considered the number of burn complaints to be "statistically insignificant".
After hearing such testimony a jury found McDonald's liable and awarded $200,000 in compensatory damages. The jurors deducted $40,000 for contributory negligence. Also, given McDonald's conduct, the jury awarded $2.7 million in punitive damages, which was equal to 2 days of coffee sales.
Later the judge reduced the punitive award to $480,000. While awaiting appeal the two parties settled out of court for an undisclosed sum.
The #1 sickening thing about the whole McDonald's coffee hype is how it distracts from the facts. I suppose you just glibly believed whatever it was the mass media told you about that McDonald's case didn't you?
Disclaimer: I am a lawyer, but I'm probably not licensed in your jurisdiction. This isn't legal advice, anyway. If you need legal advice, see an attorney licensed in your jurisdiction.
The only thing surprising about this is that it took so long to happen. In fact, this was my initial reaction to the use of Visa for these places.
Using a Visa or MC for *anything* creates a loan. It is also a contract. Courts have refused to enforce contracts that violate public policy for as far back as the Common Law records cases. You also can't sell yourself into slavery, nor consent to be murdered.
Nothing prevents the transaction if everyone agrees to it. But when a party enters the courtroom, they are asking the court/government to enforce the contract.
Gambling contracts are a particular type that courts commonly refuse to enforce. California's constitution specifically prohibits the legislature from legalizing gambling of the type seen in Nevada casinos. The public policy is explicit.
When a Nevada casino issues a loan, it is aware that it can't enforce the loan in California. For that matter, it couldn't even be enforced in Nevada until the late 1980's.
McDonald's kept coffee extra hot because it was convenient to them. They could pour cups beforehand and not have them get cold while sitting around. No other fast food place had coffee that hot, despite the fact that they presumably have the same customers. So, McDonalds had coffee too hot, had been warned about it many times so in this case it was issued a stiff punative judgement to get them to change their behavior, which they did.
I don't find McDonalds coffee to be too cold now, others may disagree but I doubt it's 999,999,999 out of a million as you suggest. The coffee tastes like shit, but that's a different story.
That's not to say I don't agree that frivilous lawsuits or at least the fear of frivilous lawsuits is invconvenient for companies and consumers. After all, if a few people hadn't gone and died from bad Jack In the Box beef, I could still get a decent medium rare burger. C'est la vie.
--
"L'IT c'est moi!"
First off, IANAL nor a resident or citizen of the USA.
OK, we know this woman lives in California. Now, for argument's sake let's say that this offshore casino is located in "Fictitia".
Where & when did this "loan" take place, and whose laws should govern the transaction(s)?
Did the loan occur in California, or in Fictitia?
Did the loan occur when she opened her Visa account, or when she opened her gambling account?
Was it even one single loan, or was there one loan for every transaction?
It could have made an interesting test case if they had not settled.
Ahh - My eye!
The doctor said I'm not supposed to get Slashdot in it!
How is Visa to know what the card is being used for? All they can possibly know is what merchant is charging the card and for how much (well, that's all they can possibly know while still maintaining some semblance of legality, at any rate). Last I checked, they bear no respobsibility for what you do with the card. As a matter of fact, since this woman used her "loan" for an illegal purpose of which Visa wasn't aware, you might be able to say she committed fraud.
Sure, credit cards are a form of loans. However, Visa did not lend her the money so she could gamble with it. They did not know what was going on, so I don't think they should be held liable for this in the least. This idiotic woman should have to pay every last cent of that gambling debt. She chose to play, after all, and it's no one's fault but her own that she messed up.
Suppose she won. Could the 'gambling establishment' refuse to give her the winnings on
the grounds that she used an illegal loan?
The way to WIN on gambling $70.000 is by doing at most a few bets. If you place 7000 $10 bets, the chances are pretty slim(*) that you will "win".
(*) slim as in happens once in the lifetime of the universe if someone tries the experiment every second.
Here in the netherlands, the odds on some bets are acutally fair. Betting red/black on the roulette table gives you a 50/50 bet. Betting a number gives you 1/37 chance * 36 payback, so you lose
on every bet. The red/black rules are such that you get exactly 1/2 * 2 return.
The reason the casino can still make a profit is that people have credit limits. Either in "money in wallet" or on their credit card. That means that you can bet until you're broke. There is a 100% chance that you can "bet till you're broke". If you start with $100 there is a 50/50 chance that you'll end up with $200 before going broke. Many, MANY gamblers will continue "because they are on a winning streak". That means that the stakes for the casino just doubled for the casino ("Yeah right"), but the person still has a good chance of going home broke.
If you really want to make money against the casino, you should go to the casino with $100 in your pocket and leave (or at least stop betting) when you're $10 ahead. There is about a 90/10 chance that you'll leave the casino with more money than you started out with. But the 10% chance is that you'll have lost $100, and the 90% chance is that you'd have won $10.
Roger.
Visa will chargeback the gambling sites, and they will also 1099 the delinquent woman.
Visa doesn't want to lose any money if they can't help it, and their ongoing business relationship with the gambling houses allows them to chargeback the full amount. If the gambling houses don't like it, then they don't have to accept VISA, now do they?
No matter where Visa gets its money from, the woman received $70,000 of income that she spent how she pleased. She owes taxes on it.
I'm not a lawyer either, but I have consulted for credit card companies, and that's how I know.
If tits were wings it'd be flying around.
What's kind odd is that the comment got a score 0:Troll. So someone actually moderated it up (otherwise it would have been score -1: Troll). In theory, MetaModeration is supposed to make up for that, but obviously it's far from foolproof.
D
----
The Register has a funny story on this case.
;)
Well, I laughed
-W
So if Citibank is International (it is), they are no longer required to know and obey the banking laws in the places they do business?
That is the "price" of being a large international company -- you have a team of lawyers, in-house and on-retainer, whose job it is to know the various laws that affect the way you do business in the many places.
Now, what happened is that credit cards companies have to differentiate between "purchases" (for goods and services) and "cash advances" (for anything else). The rules between the two are widely different in the way the card companies are allowed to behave.
In many states, such as California, you may not use a credit card for gambling purposes.
Now, some will say "she did a cash advance", but that's not what happened. A cash advance is like going to an ATM machine, you surrender your card, someone draws cash against your card and hands it back to you. (In fact, the most common place for credit card cash advances IS the ATM machine, with local banks being a close second). Most credit card authorization agreements strictly forbid the merchant from performing cash advances (hence you can use your ATM card to do "$20 over" at the grocery store and get change, but they won't let you do that with your Visa card because that would be a cash advance).
Her contention appears to be: This wasn't a cash advance, because no cash entered my hands, and it couldn't have been a charge, because credit card charges for gambling are illegal in California.
Is the law dumb? Yes. You should be able to spend your money or ruin your credit rating on whatever you want to. This is still (supposedly) a free country.
Did Visa violate the law? Absolutely, as is MasterCard probably. Most of them don't bother to do the kind of fine-tuning they need to on their card acceptance routines.
Now, if she had WON, the casino could have turned the tables and said "You fraudulently used a credit card to obtain funds" and reneged (legally) on paying her winnings.
ObDisclaimer: I am not a lawyer
Of course VISA can regulate the use of the card -- they're the ones loaning you money. it's their money, and if they decide one day that you won't be able to charge anything at Sears, then you better have another card in your pocket if you want to buy something at Sears.
And if you want to buy something that's illegal, VISA better have a check in the system to not authorize the purchase, since they know they won't be able to collect. this is not new, or specific to E-commerce, it's long-standing law that contracts in which one party is engaging in illegal activity have no binding. That's why a hooker can't take a john to court if he doesn't pay (but you'll probably visit the ER sometime soon)...
Recursive: Adj. See Recursive.
In all likelyhood, VISA will simply charge-back the gambling group. if the gambling group wants to keep their ability to process VISA cards in the future they'll live with it (and operating e-commerce means taking credit cards or going out of business, so I suspect they'd like to keep the account).
:)...
That's how it works, and why VISA and MC are generally able to write off things like this without a big hassle. i've gotten charge-backs for all sorts of things, from malicious retailers who deliberately tried to screw me to people who just send the wrong item. One call to your credit card company will usually have the merchant screaming "uncle".
the net result of this will not be a "chilling effect on the growing online economy" but the gambling group taking more care to ensure they're dealing with legal gamblers -- just remember that at the end of the day, the house ALWAYS wins
Recursive: Adj. See Recursive.
A law is a law; judges exist to uphold the law. The theory this country's legal system is that it is run by laws, not judges, as much as possible.
:)
:) would you fault the bank for giving her loan?
I agree with spirit of your post. Too many times the law is overlooked by judges and juries around the country. Judges and juries tend to make decisions by how the feel about it, and not sticking to the law. A perfect example is Roe V. Wade, but lets not go there shall we?
So let's look at this. If it's not legal in California to give loans for gambling, then if you loan someone for gambling, IT'S ILLEGAL.
I'm not sure that the article said that it was illegal, only that courts in California "frown upon" loans given out for the purpose of gambling.
And despite the way people VIEW credit cards, any purchase you make on a credit card IS A LOAN.
While IANAL, I would have to question whether a purchase on a credit card is actually a LOAN per se... Credit cards are more like overdraft protection at a bank, except that you never have a balance. If she had written a CHECK for $70,000, and, assuming she could get that much overdraft protection (not likely, but this is a hypothetical situation
The fact that the transaction was automatically by a computer does NOT make it legal in any way
Agreed. But for a law to be effective, it has to be enforceable. For instance, the CDA, which made it illegal to allow minors to view "harmful" material on the Internet, was struck down and one of the reasons was that the law was not enforceable (besides the fact that it was too broadly worded). How would you expect the credit card company to police itself against "making a loan" to Californian online gamblers? Should they simply not do business with online casinos? What about the people in other states where loans to pay for gambling aren't illegal? Sounds like this judge is looking for a good way to effectively end online gambling.
Personally, I would say that the California law, or at least this ruling, is unconstitutional, perhaps in violation of the first amendment. You could make the case that online gambling is a form of expression and that supressing that expression is censorship -- hence in violation of the first admendment.
So which law do you think the judge has a higher obligation to uphold? The law about not making loans to gamblers or the First Amendment to the Constitution of the United States of America? I think the answer is pretty clear.
My journal has hot
Much of the law has to do with the fact that someone can't loan money with the knowledge of the fact that it is going to be used for gambling. You might try to make the instantanius argument that Visa had no way of knowning what the money would be used for, and such and such. But that would be a blatent untruth. Visa, or any other credit card company has the right to dissapprove of any merchant from using its service. So if Visa had stopped and considered the law, it should either not allow merchants which offer gambling to accept their credit cards. Or make very specific deals with such merchants as to only accept cards from certain states. This was an oversight on visa part, and it is the one to blame. NOT that I don't think the lady should be SMACKED around a bit :) but on a purly legal status, its still Visa's problem. Though if Visa is smart it will refuse to pay the Online Casino, which is something that by contact Visa usually has the right to do. And in all honesty I'm not about to feel sorry for the Casino for loosing its money :)
It has long been the policy of the State of California to not enforce gambling debts. Even if this woman had traveled to Vegas, and blown her credit card while in Nevada, her bank would be prevented from attempting to collect while she was a resident of California.
The precedent for this is Hamilton v. Abadijian which states "The owner of a gambling house who honors a check for the purpose of providing a prospective customer with funds with which to gamble and who then participates in the transaction thus promoted cannot recover on the check." While this doesn't mention credit cards, it is naturally extensible to them. If you went to a Vegas casino, you can be damned sure they won't take a credit card or a check if you are from Calif.
The grounds for such a ruling is that it is against the laws of California to allow gambling, and therefore debt incurred while gambling is uncollectable within California. The contract to pay said debt enables an anction which is illegal, and contracts to carry out an illegal action are unenforcable. It should be noted that it would also be perfectly legal for the online gambling house to refuse to send any winnings to California since the contract is unenforcable, no matter who owes what to whom.
The judge had no choice but to make this decision, as the law is fairly simple and straightforward. While not every state has laws against gambling (or they might have special laws stating that out-of-state gambling debts are legal), there is not a state in the US that will enforce contracts for conduct that is illegal within its borders.
The moral of the story: The online casino should have done its homework, and looked up this woman's address first.
And what, exactly, do you expect to the credit report to state?
Remember, Visa *settled*. The matter is closed, and they can't report that the woman didn't pay a lawful debt. (Note the key word "lawful.") They can't list the debt as unpaid during the time the charges were challenged.
Could they still manage to put a barb in the credit bureau report? Sure... and it would seem to be a slam dumk for slander because the case has already be brought before a court and Visa settled.
For every complex problem there is an answer that is clear, simple, and wrong. -- H L Mencken
When you sell a prepared food product, the implied warranty is that it is fit for immediate human consumption. For hot beverages, that may not imply "that you can drink the whole cup instantly", but it does imply that it won't give you third degree burns!
(A friend of mine is currently involved in a lawsuit after she was poisoned by coffee containing toxic cleaning chemicals. I suppose your response is that she should have had it checked by a toxicologist before drinking it - who says coffee can't contain poison? Consumers have a choice, after all...)
Which is probably why the jury reduced the award for contributory negligence on the part of the burn victim.Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood
I'd have to say this is a case of "there is no honor amoung con men" - casinos though they could cleverly get around the law by going online and offshore, and this woman turned out to be more clever at getting around the law.
Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood
Visa, in this case, is wrongfully left holding the (70k) bag for this user. If I worked in risk managment at Visa, I would be very hesitant about offering services to on-line companies that could potentionaly open the comapany up to such exposure.
If I was a user, and unknowingly charged a 6 pack of Linux Xeon servers from Dell.com and mayed the argument that "I thought those little pull down menus were a tetris game!" Would a simprethetic judge leave Visa holding my bill for my new . . . .wait for it . . Beowolf cluster? :)
Remember this is a California Law against the gambling loan, so it wouldn't apply in Vegas.
On a side note, in Texas it is illeagal to sell the state's lottery tickets on a credit card, but debit cards are OK since they aren't a loan.
You also need to keep in mind that the ATM's are giving cash advances, with all the extra fees etc, and cash is then cash.
This probally wouldn't be an isolated case (although in TX the courts are probally more conservative than in CA).
This is accounted for via SIC codes (Standardized Industrial Classification). Each merchant account has one associated with it. Unless the merchant lied about what they were selling the SIC code would have clearly indicated it was for gambling.
So since they had the knowledge of that it was gambling, were already doing special processing on the charge, and had the individuals address, Visa should have blocked the charge!
While I don't think this woman should have sued Visa, I can see how she could manage to get them to settle.
P.S. IANAL but work within the ecommerce industry so I'm familiar with how the credit card system is setup
It's really unfair to bash the judgement here. A law is a law; judges exist to uphold the law. The theory behind this country's legal system is that it is run by laws, not judges, as much as possible.
So let's look at this. If it's not legal in California to give loans for gambling, then if you loan someone money for gambling, IT'S ILLEGAL. Wow. And despite the way people VIEW credit cards, any purchase you make on a credit card IS A LOAN. That's the reality, even if most people don't THINK about it that way. And since it's clear to the credit card company that the money is going to a casino, it's obvious that they're LOANing the woman money TO GAMBLE WITH. The fact that the transaction was automatically handled by a computer does NOT make it legal in any way. It isn't about what the company could do, or whether it was intentional. If you break the law and don't know about it, you've still broken the law. That's why large companies hire lawyers.
IANAL of course (lawyers on Slashdot? don't make me laugh) but this decision seems completely reasonable to me. The woman's motives are irrelevant. "Common sense" means the opinion of a large majority of people, and is also irrelevant. If you don't like this decision, direct your wrath at the LAW. If you live in California, write letters to your politicians. Sitting around whining about how stupid the "system" is, when all the system has done is uphold the law, is just pointless.
I have seen the future, and it is inconvenient.
Go to your nearest burn unit and ask them if they would call "190F" liquids "hot".
... and at least they could vomit it out. The woman involved in the suit had the hot liquid dumped onto clothing which held it against her skin.
*NEVER* make the mistake of thinking that the "temperature" shown by a thermometer has any direct correlation with the potential damage to human tissue. A child or elderly person can be scalded with water not much above 120F, and even a healthy adult can be scalded by water over 140F.
190F will scald anyone. 190F is *boiling water* in these parts. (Well, in the mountains to the west; in Denver water boils at around 200F). Anyone who quickly drank that coffee would require medical attention for severe burns in their mouth and throat
(Before you comment that anyone dumb enough to drink something that hot deserves what they get, what about people who have lost most feeling in their hands? *You* might be able to feel the heat through the cup, but many people will feel nothing or only mild warmth.)
I could understand that one particularly dumb manager didn't understand the consequences of keeping his coffee around 20F hotter than everyone else, but the plantiff's lawyers showed that McDonald's knew it was causing injury *and* refused to accept responsibility for those injuries.
For every complex problem there is an answer that is clear, simple, and wrong. -- H L Mencken
There are plenty of bogus personal injury lawsuits out there. (I was hit by one myself after a fender bender a few years back, and despite the utter lack of any real case on the plaintif's part my insurance company decided it was cheaper to settle than go to court.) But the McDonalds coffee lawsuit wasn't one of them.
Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood
Clearly gambling is a mental disease in cases like this. Can anyone really fail to understand that casinos, electronic or otherwise, are not in the business of giving away money to the persistent? You have to deny reality very powerfully to invest $70k in an effort to show otherwise.
Letting this woman off without at least mandatory therapy is no service to her or to society. I hope she gets help.
I blame the CC company for settling. And not it specifically, but corporations in general. If you wonder why everyone and their brother is suing, the answer is simple -- because it works. As long as court will cost the corporation more than you are asking they'll settle. Principle is not a word in their vocabulary without a bottom line to back it up.
I'm amazed they didn't require non-disclosure in the settlement, that's usually part of the deal. Especially when problems are found in a product that might cause a recall if generally known. Here I expect a lot of copycats trying the same trick, so I wonder if they will continue to settle further cases?
Apparently they are putting the responsibility to check origin of customers on the offshore gambling sites. This seems equivalent to telling them to close their doors. Certainly the credit card companies are more likely to know where the customer lives and what credit law is like there.
I spent several years working in casinos in Atlantic City. The credit card companies have machines similar to ATM's that allow you to obtain cash from your credit card within ten feet of the casino floor. I suppose they're not there specifically for gambling purposes though :)
numb
The judge didn't rule that VISA and MasterCard was at fault and that she was right. The Creditcard campanies settled with her. Settlements happen outside of the courtroom.
In other words, VISA AND MASTERCARD DECIDED NOT TO FIGHT HER!!
Je ne parle pas francais.
This event is a showcase of the general malaise of this country. If you blew 70 grand in VEGAS you would get no forgiveness. However, some crackpot blows the same amount ONLINE and is immediately forgiven by an equally incompetent judge. Calling the credit card a "loan" doesnt quite work. This event sets a rather unfortunate precident for the future, meaning that I wouldnt want to get into the online casino business any time soon.
"Dancing is the vertical expression of a horizontal desire" --Robert Frost
After 3-5 years of non-payment, the credit card company will forgive the debt owed to them by their delinquent customer. The customer at this point usually thinks that they are off the hook, scott free.
BUT, an unpaid loan turns into *tada* INCOME! This income becomes TAXABLE! So, once the debt is forgiven, the credit card company turns in their customer to the IRS, and the customer suddenly finds themselves with a tiger on their tail. A much bigger tiger than a credit card company.
The woman who got the $70,000 forgiven now owes about half that amount to the IRS, plus late penalties, fees, and interest.
I'm really surprised that the article didn't mention that, but maybe not too many people know about it.
If tits were wings it'd be flying around.
I mean, VISA loans her money for gambling, she looses, she sues, VISA doesn't charge her (duh).
Suppose she won. Could the 'gambling establishment' refuse to give her the winnings on the grounds that she used an illegal loan?
Still trying to get my head around this ridiculous judging.
Now I'm not a lawyer, but when you apply for a loan, you usually are asked to specify the reason - if you put "Gambling" then the bank should refuse it if its illegal... if you however put "general expenditure" and go about gambling, why on earth would the bank be held liable for that? Besides VISA accounts are not really loans, they're more like a general expenditure overdrafts.
VISA had knowledge of where the money was going, but stop and think for a while: VISA is international, there are god knows how many weird or even contradicting laws, hence its not only ridiculous, its impossible for them to filter transactions.
Oh well. I guess they could just add another disclaimer in their next version of the contract. Yet another proof that the US legal system needs a healthy dose of common sense.
-W