As long as gambling has been around, gamblers have played on credit. Over the years the extension of credit to gamble has evolved from a player’s handshake to the signing of a marker to show the player’s commitment to the obligation and the creation of an enforceable document by the casino. Markers in today’s casino world are generally designed to look like “counter checks.”
Counter checks are blank checks that can have bank account and bank routing numbers added to them so they can be deposited into a bank and processed like a traditional check. Generally, when a casino holds a patron’s marker they give the patron, pending the policies of the casino, anywhere from 30 to 180 days to pay it before the casino deposits the marker(s) in the bank, starting the collection process.
In the old days the decision to give a player a marker would be based on the patron’s reputation, play history and judgment of the casino boss making the decision. Over the years, casinos stopped relying on reputation and judgment in favor of running bank and credit checks before the patron’s casino visit and establishing a line of credit for the patron that could match their ability to pay.
So what would the CFPB (Consumer Finance Protection Bureau) have to do with casino markers?
The CFPB is charged, among other tasks, with essentially protecting the public from excessive and abusive lending practices, which while sounding proper and noble begs many questions in the forms of what is excessive and abusive.
Anyone who drives around town will see a plethora of storefronts advertising fast cash, payday loans and title loans that offer quick cash to those who need short-term cash between paydays or to cover a sudden emergency. Where there is a need there is a market and when there is great need there is a willingness to pay a high price to cover that need.
So like the character “Whimpy” from the old “Popeye” cartoon strip, who famously declared, “I will gladly pay you Saturday for a hamburger today,” and would do dang near anything to get that hamburger, patrons in need of quick cash are very willing to pay just about any price to get that cash.
Rates of course vary, but if you borrow $100 and need to pay back $120 at the end of a week, that interest rate equates to an annual rate of 1,040%. As some of these short-term loans can be ruinous to the borrower, the CFPB is flooded with complaints about high interest rates and abusive collection practices of some short-term lenders.
As both the CFPB and local regulators try and reign in short-term lenders from what they consider abusive practices, the short-term lenders continue to get imaginative in their methodologies of lending. Used to be, a borrower would go to a short-term lender, sign a contract or post some form of collateral, get a loan, then pay back per the terms.
While that practice is still available, some operations now offer loans based on taking post-dated checks that they will deposit on the agreed date, and those checks include the principle and interest associated with the loan. By the way, bounce a check and depending on the amount and the laws of the jurisdiction you could be arrested and go to jail for the bad check(s).
By contrast, if a casino patron fails to timely pay their casino markers, the casino, using a micro-encoder, will add the patron’s bank information to the markers and deposit with the bank. If the markers clear – great; if not, then the casino collection efforts can include turning the bounced markers over to the District Attorney’s office for collection, which can result in the casino customer receiving an enforcement judgment or even being arrested.
In an effort to curb abusive lending practices the CFPB, among other measures, is supposedly considering requiring certain forms of short-term loans, which could likely include casino markers unless specifically excluded, to include full documentation and processing like any conventional bank loan for all granting of credit/short-term loans.
While the casino industry is not the intended target of such considerations, the efforts to curb abusive lending may significantly impact if or how casinos grant markers in the future. Perhaps the industry should ask congressional representatives to weigh in earlier rather than later or the high-end table game play may suffer yet another unintended consequence from governmental regulations.
The Analyst is an experienced gaming industry executive who offers insight each week on events and issues affecting the industry. Contact The Analyst at [email protected]