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Casino Lending: Following the Rules Gives Harrah’s a Win

In the heavily regulated casino industry following the magnitude of rules often seems like a burden that increases costs and gets in the way.  But Harrah’s was rewarded with an important win on Friday when the New Jersey Appellate Division, the intermediate appellate court, affirmed a lower court judgment in favor of Harrah’s for a $160,000.  The court recognized that Harrah’s is in the business of operating casino gambling, the defendant was its customer – their relationship is built on enabling gaming not withholding it.  Harrah’s had no duty to its customer to deny him credit even if he was a compulsive gambler.

 

The Harrah’s casino gambler, M.D. (I’ve used only his initials because his name is not important to this report), requested and obtained $160,000 to gamble with from a $200,000 line of credit.  He secured the loan by issuing counter checks drawn on his bank account.  New Jersey has strict statutory requirements that render any check “cashed, transferred, conveyed, or given” without following the statute invalid and unenforceable.  N.J.S.A.5:12-101(f).  Sections (b), (g), and (h) of the statute lay out as many as thirteen requirements that may apply to the acceptance of a check from a player to allow them to participate in a gaming or simulcast wagering activity.  Here Harrah’s complied with all of the requirements that applied to their transaction with M.D.

 

When M.D. failed to repay the loan Harrah’s presented the checks to his bank, which dishonored them for lack of funds.  Harrah’s then sued to enforce the loan requesting the loan balance, interest, and attorneys’ fees.    The trial court in Atlantic County found in favor of Harrah’s.  M.D. did not contest that the loan was given to him, he failed to repay it, and his checks bounced.  He claimed instead that Harrah’s should never have loaned him the money because he was a compulsive gambler.  He claimed he was listed on a “central credit registry” and no one should have extended him credit.  He did not identify the registry or prove he was on it.

 

New Jersey’s statutory scheme offers casino gamblers the opportunity to place themselves on a list maintained by the Division of Gaming Enforcement under N.J.S.A.  5:12-101(j).  Once notified of a gambler’s placement on this list all casinos must immediately deny credit privileges to them.  The self-exclusion list that exists under N.J.S.A. 5:12-71.2(a) also affords compulsive gamblers the opportunity to designate themselves as not allowed to gamble, but if they manage to enter, gamble, and lose the casino is not liable. N.J.S.A. 5:12-71.2(c).   The existence of a bounced check to any casino also automatically suspends a gambler’s credit privileges at all other casinos.  N.J.A.C. 13:69D-1.27(g).

 

This is an example of where careful compliance with the statutory lending requirements saved the casino money, reinforcing the need for training and proper back end controls.

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