The white paper – Proposals to update UK gambling legislation (V)
We continue to publish extensive extracts from an important project subject to public debate by the British Government, the so-called White Paper.
By Dan Iliovici, Vice-President ROMBET
Benefits of gambling
Gambling can be sociable, can help tackle loneliness and isolation, can enhance the enjoyment of other activities, and can be a valuable pastime in its own right, although quantifying these benefits is inherently difficult.
There are also economic benefits to having a well regulated industry to service this demand.
The gambling sector also contributes significantly to other industries, including sport, advertising and racing. (…)
Gambling can also contribute to tourism, for instance to seaside towns across the country, or high-end casinos attracting wealthy overseas visitors who spend across a number of other sectors while in this country.
Additionally, some gambling products enable charities and other non-commercial organisations such as sports clubs to raise valuable funds. ”
After this clarification, we continue the detailed presentation of the document.
1.2 Account level protections
26. The obligations on remote operators to monitor account activity and intervene where individuals display signs of potential harm are a cornerstone of the current package of protections online. This has been further strengthened through the Gambling Commission’s changes to customer interaction requirements*1 which largely came into effect in September last year. This approach allows tailored interventions to prevent harm without interrupting the experience of those showing no signs of risk. The Review considered how these protections could be strengthened further.
27. Understanding the context of an individual’s gambling can add significantly to an assessment of whether they are likely to be suffering harm. A key external circumstance in this regard is a customer’s financial situation. There has been much discussion on the role of investigation into personal financial circumstances as a tool to help identify potentially out of control and harmful gambling.
28. Online gambling is a mass market activity and losses which some people can comfortably afford have the potential to cause significant harm for others. Operators are therefore already expected to consider customers’ financial circumstances to inform case by case risk assessments of whether an individual’s gambling may be harmful. However, there are continuing cases of operators failing to respond appropriately to gambling spend which would be clearly unaffordable for the vast majority of the population. This has led the regulator and many others to conclude that more prescriptive requirements are needed to strengthen protections for customers and set clear expectations for companies.
29. The scale of the issues can in some ways be seen through survey data, although the picture is mixed. Combined analysis of the seven major household prevalence studies between 1999 and 2018 by Regulus Partners and Professor Ian McHale shows that 19.2% of online slots, casino and bingo gamblers responding to the PGSI questions reported that in the previous year they had ‘at least some of the time’ bet more than they could really afford to lose, with 4.4% saying this was the case ‘most of the time’ or ‘almost always’. 8.9% of respondents felt that their gambling had ‘at least some of the time’ caused financial problems for them or their household. There have also been a number of individual case studies which show clear failures by operators to prevent unaffordable losses, including relatively recently (see Box 2 below).
30. The Gambling Commission published a consultation and call for evidence*2 on issues around customer interaction, including preventing harmful or unaffordable losses, in December 2020. It received 13,000 responses, and led to the Commission identifying three key risks which might give rise to financial harm, reflecting the variation in customers’ circumstances and how problematic gambling can manifest:
– Financial vulnerability: where customers are unable to absorb additional financial strain incurred through gambling, even at modest levels of spend.
– Binge gambling: where customers spend significant amounts in a short space of time, perhaps very soon after opening an account.
– Unaffordable losses sustained over time: where customers incur significant losses over a prolonged period.
Box 2: Compliance case studies and accounts of personal experience
Financial vulnerability
We received a number of anecdotal accounts from individuals with personal experience of gambling harm that illustrated the relationship between gambling harm and financial vulnerability – both as a cause and/or effect. For example, in its advice to the Gambling Commission on this Review, the Commission’s Lived Experience Advisory Panel shared the following testimony: ‘I’ve never bet more than £50 and my average stake was £8.01 but still ended up in £10,000’s of debt, bankrupt and suicidal… I wouldn’t have hit triggers of £500 plus’.
Binge gambling
In a case which recently led to compliance activity by the Gambling Commission, a customer lost £36,000 in four days without appropriate financial risk assessment being carried out. This is above the disposable income the Office for National Statistics estimates was available to the median household for an entire year in 2021 (£31,400). As such, the rate and level of spending would have been unaffordable for the vast majority of UK households, and likely to indicate harm.
Sustained losses over time
In a similar compliance case study identified by the Commission, a customer lost approximately £33,000 in three months without the operator carrying out any financial risk assessment. Compliance staff subsequently examined the information held by the operator on this customer, which suggested they had an annual income of £8,500. This suggests that, had the operator assessed the customer’s financial circumstances earlier and more effectively, they could have acted to reduce the extent of financial harm suffered.
31. The Financial Conduct Authority’s Financial Lives 2022 Survey*3 found that 24% of UK adults have low financial resilience, potentially making them unable to absorb financial shocks such as losing their main source of household income for a week. It also found that 47% of adults display one or more characteristics of vulnerability. Similarly, work by the Social Market Foundation*4 has considered ‘Minimum Income Standards’ and the potential for gambling losses to impact personal and household living standards for some groups. Figure 6 below shows YouGov data on discretionary income available for different age bands as reported in the Commission’s consultation, and can be considered alongside other data such as from the ONS. A financial risk model must help protect those vulnerable cohorts for whom even relatively modest gambling losses could be in itself harmful, for example by limiting income available for necessities. This is particularly relevant in light of the rising cost of living which we recognise is likely to exacerbate issues around financial vulnerability.
Figure 6: Discretionary income per calendar month, across different age groups
Source: YouGov, via Gambling Commission
https://consult.gamblingcommission.gov.uk/author/remote-customer-interaction-consultation-and-call/supporting_documents/CI%20consultation%20call%20for%20evidence.pdf#page=19
32. Equally, while high losses are not necessarily harmful, it holds that the higher the gambling spend (particularly in a short period of time), the smaller the proportion of the population that can afford it without negative consequences. A number of studies show higher spending is strongly associated with increased risk of or actual harm. 37% of National Gambling Treatment Service users in 2021/22 reported spending over £1,000 on gambling in the month before receiving treatment, and each year around 70% of callers to the National Gambling Helpline mention some level of gambling debt or financial hardship. This aligns with recent research into online gambling*5 specifically, which found 22% of regular online gamblers with annual losses over £700 were experiencing ‘problem gambling’ according to the PGSI two years later. It is clear that a financial risk model must also pay especially close attention to those who lose unusually large sums relative to both other customers and other likely outgoings.
33. An approach to customer interaction which includes consideration of financial context can allow tailored interventions for the minority who are showing signs of gambling which is likely to be unaffordable to them (suggesting loss of control or harm), while allowing those who are not gambling in ways likely to be harmful the freedom to spend their money as they wish. There has been widespread support for this principle, including from the House of Lords Select Committee, the Social Market Foundation, Parliamentary groups, those with personal experience of harm and the gambling industry, although all have differing interpretations on how the principle should be applied in practice. As explored in the Commission’s advice to this Review, different checks are likely to be necessary to address the different risks, and requiring the appropriate checks at appropriate thresholds is key to ensuring the system is effective.
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*1 https://www.gamblingcommission.gov.uk/news/article/gambling-commission-sets-new-rules-on-action-forat-risk-customers
*2 https://consult.gamblingcommission.gov.uk/author/remote-customer-interaction-consultation-and-call/
*3 https://www.fca.org.uk/data/financial-lives-2022-early-survey-insights-vulnerability-financial-resilience
*4 https://www.smf.co.uk/wp-content/uploads/2020/08/Gambling-review-andreform-August-2020.pdf
*5.https://natcen.ac.uk/sites/default/files/202303/Patterns%20of%20Play_Technical%20Report%203_Followon%20Survey%20Stage.pdf#page=30
