Ron Paul along with Senator Barney Frank addressed the House Financial Services Subcommittee on Domestic and International Monetary Policy, Trade, and Technology today along with credit card companies and banks who stated the current law could upset legitimate transactions if left in place along with other implications due to trade agreements.
Chairman of the House monetary police and technology subcommittee, Representative Luis Gutierrez, D-Ill explained that the current situation could impose a risk on regular consumers who do make lawful transactions within these financial institutions. He went on to say “It is easy to see how these regulations, if implemented in their current form, could wreak havoc on electronic commerce in the U.S.”
Given the current state of the UIGEA and how it has been difficult to implement, the hearing brought up many valid concerns over ownership and liability as to how these payments are processed. According to reports from the Federal Reserve database, there are over 100 billion payments made per year and it has been implied that many other governments won’t necessarily uphold or even be able to identify which of these payments are legal and which are illegal especially since many of these are coming from companies which are regulated and legal in other areas of the world.
Leigh Williams, who spoke on behalf of the Financial Services Roundtable stated that the government’s decision to apply a law which has not been completely identified places a strain on members of their group which consists of Visa, MasterCard, Bank of America among other financial institutions. There is no way that these companies will be able to know if a transaction is restricted or not until the government clarifies this for them. She proposed that the US government provide a list of names of gambling businesses that can be blocked from consumers within the US. Without this there is a possibility that a purchase could be misclassified and payment denied adding liability to the financial processor.
Federal Regulators turned this down stating that “the government must engage in an extensive legal analysis to determine whether the gambling Web site is used, at least in part, to place, receive or otherwise knowingly transmit unlawful bets or wagers” and that due process safeguards “would result in considerable added costs.”
Rep. Ron Paul argued that the draft regulations from the Federal Reserve and Treasury Department, which suggests monitoring gambling related websites is not an option saying, “Though I do not endorse gambling per se, people should make their own decisions. It’s a personal choice. I’ve always been concerned about this type of regulation and legislation–it’s likely to open the door (to control and regulation) of the Internet itself.”
Williams also agreed on behalf of the banks that ” ‘monitoring of websites’…is inappropriate to include in a financial institution’s monitoring activity.”
Barney Frank used the opportunity to speak on his bill which would legalize online gambling and roll back the clock to pre-UIGEA days. His bill asks for effective legalization combined with regulation.
“Our objective is to craft a rule to implement the act as effectively as possible in a manner that does not have a substantial adverse effect on the efficiency of the nation’s payment system,” said Louise Roseman, the Fed’s director of reserve bank operations and payment systems.
Regulators are expecting to have a final ruling by the end of the year.
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