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Hardware bans aren't used for several reasons.
The most notable one is that HWID can be changed / spoofed.
VAC focuses a lot on reliable detection and preventing false positives. As soon as people start getting banned by HWID/IP address, you get a lot more false positives.
Most importantly, HWIDs can be spoofed.
This means that other people could change their HWID to yours and then get you banned.
I see this conspiracy theory all the time; that Valve is purposefully not banned cheaters to make more money.
It was actually discussed in a Steam Dev Day (if I remember correctly) where they said that the negative impact of cheaters on the community makes them lose more money than they would gain from the cheaters rebuying accounts.
-- Edit
P.S. Don't name and shame people here on the forums please. Its against the rules.
I feel like the report system just doesnt work properly...
if that is the case, please post here.. http://steamcommunity.com/app/730/discussions/
it does actually
yet again you being unhappy about the ban system doesnt mean its not working
Any objective data to back up this highly suspect statement? How do they put a dollar value on "harm to the community"?
And even if "fear of cheaters" is among the top reasons for someone to not buy CS (or whatever game), in most "AAA" games, it is only a "fear", i.e., a perception. The real incidence of cheaters is far lower than any nub who says "I refuse to play that game because of cheaters." can be convinced to believe.
Seems like it should be addressed as a marketing/"customer education" issue.
edit for clarity
User A cheats, User B is a legit player, has a massive inventory and a 12 year old account.
User A gets flagged by VAC, let's say their power goes out for 30 minutes the next day.
User B has been having trouble with their modem so they do a hard reset.
User A gets assigned a fresh IP and User B does as well... Unfortunately for User B, they are assigned the IP that User A had when their account was flagged.
User B gets a nice VAC ban a few days later because they had the unfortunate luck of getting an IP that was flagged. Yeah, great idea!
As for hardware bans, the same issue applies. User A gets ban, user B is looking for a new mobo. Use A sells User B their mobo and now User B gets banned. Another terrible idea.
2. It can be bypassed
3. internet cafe / lan party hackers
4. money