More American are gambling their way to the poor house, piling up credit card debt and then filing for bankruptcy. A new study released this morning concludes there is a correlation between the rapid growth of legalized gaming and the current surge in personal bankruptcies. NJ-based SMR Research says the overall personal bankruptcy rate is 18% higher in the 298 U.S. counties which have legalized gambling and 35% higher in counties with five or more gambling outlets. Shelby County, Tennessee which has easy access to nearby Mississippi gaming establishments boasts the highest bankruptcy rate in the nation, four times the national average. SMR points out the vast majority of the nation’s 2.5 million compulsive gamblers use credit cards for gambling money and more than 20% of compulsive gamblers have filed for bankruptcy. The firm estimates credit card companies must charge at least two percentage points of interest to cover bankruptcy losses. The study’s release comes less than one week after the Federal Bankruptcy Review Commission adopted a draft proposal which permits easier dischargeability of credit card-gambling related debts.
A new study demonstrates there is a correlation between the rapid growth and availability of legalized gaming and a recent surge in personal bankruptcies.
The 250-page report by SMR Research Corporation of Hackettstown, N.J. said that the casino industry’s trade group, the American Gaming Association, reported the number of household visits to casinos during 1995 was 154 million, “up 23% from the previous year and up an astounding 235% since 1990.” SMR estimates that the number of personal bankruptcies in 1997 will surpass 1.35 million, up 43% in the past three years.
Further, according to the SMR report, those counties where residents had access to more than one gaming facility were much more likely to have significantly higher rates of personal bankruptcies:
The 298 U.S. counties which have legalized gambling within their borders had a 1996 bankruptcy filing rate 18% higher than the filings in counties with no gambling — and the bankruptcy rate was 35% higher than the average in counties with five or more gambling establishments.
Atlantic County, the only location in New Jersey where casino gambling is legal, had a 71% higher bankruptcy rate than the state average…and Nevada, the only state to have legalized casino/sports betting, had a 50% higher bankruptcy rate than the rest of the nation.
And Shelby County, Tenn., where residents have easy access to 30 gaming halls and riverboat casinos in nearby Mississippi locations, has the highest personal bankruptcy rate in the nation — four times the national average — according to the report.
SMR Research Corp. is the nation’s leading publisher of in-depth research about consumer financial services topics. SMR’s study, “The Personal Bankruptcy Crisis, 1997,” also said that:
–“There are 2.5 million compulsive gamblers in the United States
— about 3% of the adult population which gambles — and more than 20% of compulsive gamblers said they had filed for bankruptcy as a result of their gambling losses.
–“There are four groups of individuals who are considered `at especially high-risk’ for personal bankruptcy filings — 40 million Americans who have no health insurance coverage; men and women who experience financial strain after getting divorced; 25 million drivers who do not have auto insurance coverage…and compulsive gamblers, “a group smaller than the others but probably the fastest growing due to the radical spread of casino gaming across America.”
George Yacik, vice president of SMR Research, said, “There are many causes of bankruptcies and, currently, gambling is not the biggest of them — or at least not yet. However, it does appear that gambling may be the fastest growing cause…due to the rapid spread of casinos.
“This report says what we have suspected for some time,” said Ed Looney, executive director of the Council on Compulsive Gambling of New Jersey, Inc. and one of the nation’s experts on the causes and effects of problem gambling. “It indicates that the economic and social costs of compulsive gambling is much more than anyone had previously suspected.”
SMR Research estimates personal bankruptcies cost more than $40 billion in 1996 and every household in the United States paid an average “hidden bankruptcy cost” of $408 because of higher-priced goods and services.
Most credit card companies charge consumers at least two percentage points of interest to cover their bankruptcy “charge-offs,” according to the report.
Several studies have shown that at least 85% of compulsive gamblers have indicated they used credit cards for “gambling money,” according to Looney. “Credit fuels the gambling addiction, which results in heavy credit card debt for gamblers. Problem gamblers many times have eight or ten different cards and are maxed out on all ot them in terms of their credit limits,” Looney said.
“Legalized gambling now has the tacit blessing of government,” the report concluded, noting that both elected and appointed officials rely heavily on the taxes from gambling activities to pay for government programs and services.
“Our first goal,” Looney said, “is to remind those who license and operate casinos, racetracks, lotteries and high-stakes bingo games that compulsive gambling is a psychological addiction that deserves an all-out proactive approach in dealing with this major health problem. Our second goal is to work with those governments and businesses to provide a safety net — a system and program to help compulsive gamblers and their families recover from this devastating illness.”
The Council on Compulsive Gambling of New Jersey, Inc. — a not-for-profit organization founded in 1982, operates a 24 hour per day helpline, 1-800-GAMBLER(TM). There were more than 26,000 calls from New Jersey residents to the helpline in 1996, according to Kevin O’Neill, deputy director of the Council.