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Sep 29, 2010

NY lottery says MasterCard users pay illegal fees

SEPTEMBER 17, 2010, 5:58 P.M. ET
NY lottery says MasterCard users pay illegal fees
Associated Press

WHITE PLAINS, N.Y. — All it takes is a dollar and a dream — and then maybe an extra ten-spot.

New Yorkers who use their MasterCards to buy subscriptions to Lotto or Mega Millions are being charged illegal fees, a state lottery spokeswoman said Friday.

Spokeswoman Jennifer Givner said that since June 1, MasterCard users have been billed as if they were taking cash advances. She said that typically means banks charge $10 fees and immediate interest at rates up to 24.9 percent.

"State law says you can't charge more than the face value for a lottery ticket," Givner said. The fees were first reported in the Daily News.

MasterCard spokesman Chris Monteiro said the banks that issue MasterCards set the fees and rates, while his company receives only a fee for processing.

But Givner said Friday it was MasterCard that changed a code for lottery purchases, moving them into a category with bets on dog racing and horse racing. She said lottery purchases were previously treated like fees for such government services as renewing a driver's license.

Monteiro said such codes are nationwide policy, so other states may be similarly affected if they allow credit card purchases. Givner said she did not know of any other states affected. Connecticut lottery spokesman Richard Wiszniak said credit cards sales are prohibited there.

Givner said New York's Division of Lottery has discussed the fees with the state attorney general's office and is hoping federal representatives will also get involved.

Gail Hurdis, a spokeswoman for Chase Card Services, confirmed that lottery ticket purchases in any state are treated as cash advances.

"We identify those transactions by the codes they are assigned by the payment networks," such as MasterCard, she said. She said customers are informed in the card's terms and conditions. Hurdis provided an excerpt that specifically mentioned lottery tickets.

In New York, lottery subscription buyers can use MasterCard at the state lottery's website. They can also mail in a check.

Givner said the lottery had stopped accepting Visa cards in June because Visa planned to assign a code that would lump state lottery purchases with illegal gambling.

"Clearly the New York lottery is a legal gaming state lottery," Givner said. "All state lotteries are legal. Visa said customers would be subject to higher fees and interest rates as a result. We said, 'Thank you but no thank you.' We no longer accept Visa.

She said MasterCard had informed the lottery about the change in code but not that purchases would be treated as cash advances or that higher fees would result.

Using the example of a $104 one-year Lotto subscription, Givner said, "Chase is saying, 'Here's your charge for $104. We're going to also slap you with a $10 cash advance payment fee ... and then they're saying from the date of the transaction, we're going to begin charging you interest. They don't wait for the billing period to conclude."

The lottery posted a warning to customers on its website and Givner suggested players avoid the fees by mailing in a check. She said the lottery is hoping to soon accept its own form of electronic payment.


Business Writer Eileen AJ Connelly contributed to this report from New York.
—Copyright 2010 Associated Press

  Daniel T. LeBel