The Michigan Legacy Credit Union has 20,000 members, many of them in low-income brackets. When CEO Carma Peters noticed that 1% of the credit union’s members made more than 1,200 transactions worth almost $83,000 in the first two weeks of legalized online gambling in the state, she decided to take action.
Starting March 2, the credit union cut off services for online betting, including legal sites.
“This could truly create a financial disaster for members,” Peters told Crain’s Detroit. “We just thought the potential risk was way too much, and it wasn’t worth it. How many people are going to want to pay on a gambling debt?”
If members can’t pay off negative balances, the credit union must then charge off balance and take it as a loss. Talking to Crain’s, Patricia Herndon, executive vice president of government affairs for the Michigan Bankers Association, said that it’s not a good business practice for banks to make credit available for online betting.
“If you are the bank stuck with that debt, that’s not a positive risk assessment to jump into,” Herndon said.
Other banks and credit unions are also blocking customers from using their accounts to gamble, citing concerns about financial risks. When online gambling became available in Michigan on Jan. 22, Comerica Bank told customers that attempts to use accounts for igaming or sports betting sites might result in suspension of those accounts.
“We generally do not comment on our internal policies, but yes, the notice is correct,” Matt Barnhart, Comerica’s vice president of corporate communications, Michigan Market, told Crain’s via email. “Nevertheless, like most banks, we will continue to monitor the federal and state legal and compliance framework surrounding internet gambling for guidance how to safely provide banking services in that area.”
JPMorgan Chase, Huntington Bank, and Capital One are among the other banks and credit card companies that also may deny customers from accessing gambling sites.
Peters said the Michigan Legacy Credit Union could reverse its policy, but she is concerned about how gaming companies target customers.
“It’s an early onset to get people hooked,” Peters said. “They’re plugging that card into these apps, and they’re playing, and they’re playing and they’re playing.”
