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Gambling Harm and Affordability Consultation: the law of unintended consequences

Posted on 05 November 2020

The Gambling Commission has published a consultation and call for evidence which proposes far-reaching additional measures to further mitigate the risks of consumers experiencing harms associated with gambling.

It proposes additional specific measures on top of the existing requirements of SR Code 3.4.1 (Customer Interaction), as well as the introduction of what is described as a customer interaction "manual" to replace the current Customer Interaction guidance (in force since October 2019).

SR Code 3.4.1 currently requires operators to interact with customers experiencing harms associated with gambling.  Processes must - 

  • Identify customer who may be at risk;
  • Interact with those customers with a view to mitigating risk; and
  • Evaluate the impact of the interaction and the effectiveness of the operator's approach.

These requirements will remain, but it is proposed that the following additional provisions will be introduced.

Proposed provision 1: Customer interaction processes

The first additional provision would require licensees to implement effective customer interaction processes which embed the three elements of customer interaction – identify, interact and evaluate - and which reflect that customer interaction is an ongoing process. 

This does not particularly extend the existing requirement, but is intended to make the requirements, including the expectation that customer interaction should be an ongoing process throughout the lifetime of the customer relationship, very plain.

Proposed provision 2 - Indicators of harm

The second additional provision would require licensees to have in place effective systems to monitor customer activity to identify harm or potential harm, from the point when an account is opened, and which must flag indicators of risk of harm in a timely manner for manual intervention and feed into automated protections as anticipated in provision 4 of the proposed amendments to SR Code 3.4.1.

The current customer interaction guidance sets out a full range of indicators that may be used by licensees to inform their actions. Going forward, the proposal is to mandate the forms of activity which must be monitored and licensees will be required to use a range of indicators of potential harm relevant to their consumers, including spend, patterns of spend, time spent, gambling behavioural indicators, customer-led contact, use of gambling management tools, and account indicators.  Licensees' systems would need to flag all such indicators for manual intervention in a timely manner and use the indicators to feed into automated interactions.

Proposed provision 3 – Specific indicators

The third provision proposed would necessitate the implementation of specific requirements to address three key indicators - affordability, vulnerability and time - as follows:

  1. Licensees will be required to conduct affordability assessments at levels specified by the Commission, and using assessments defined by the Commission. The thresholds at which checks will have to be conducted, and the types of checks (which may differ at different levels) will be based on the evidence supplied in response to the call for evidence. It follows that appropriate actions will be required in response to the outcome of such assessments, which might involve the imposition of financial limits on the customer account, for example.
  2. Licensees will be required to consider factors which might make particular individuals more vulnerable to harm, and take appropriate and timely action when such indicators are identified. Licensees would be required to take account of the Commission's definition of vulnerability which is "somebody who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care".
  3. Licensees will be required to implement actions specific to time spent gambling (which are appropriate to the gambling product in question).

Proposed provision 4 - Requirement to act

The Commission proposes elevating the current guidance to a requirement to act in a timely manner in response to identified indicators of harm. The appropriate action will depend on the circumstances and the Commission considers that this might mean stronger action (for example, requiring the customer to set a spend limit, reducing the type of products available to the customer, setting spend limits on behalf of the customer and ending the customer relationship) is required immediately rather than more normal incremental increases in interactions. 

Automated solutions, such as suspension of bonuses and incentives, and the implementation of limits, will be required in response to strong indicators of harm. The table in section 3 of the consultation, under the heading "Requirement to Act", indicates the types of interactions and interventions which the Commission would expect the licensee to implement depending on how strong the indicator(s) of harm is or are, ranging from "early generic interactions" to "strong" and "very strong" interactions. However, whilst the number of indicators of harm will clearly be relevant,  there is no indication at this stage as to which indicators the Commission suggests would warrant the stronger levels of interaction.   

Proposed provision 5 – Evaluate

Expectations around the evaluation of impact and effectiveness are proposed to be significantly enhanced. The consultation proposes that monitoring changes in play data including spend and deposit patterns and more nuanced play patterns (such as chasing losses, increasing spin speeds etc.) must take place following interactions, and that operators must take all reasonable steps to evaluate the overall effectiveness of their approach. For example, licensees might be expected to trial different interaction processes and measure their impact to understand what works best for different sections of their customer base.

Call for Evidence

The call for evidence runs to 12 January 2021. It seeks responses to a host of questions and seeks evidence, all of which will help to shape the specific requirements outlined above. For example, the information received by the Commission will (in theory) be used to identify at what level the thresholds should be set for affordability assessments, and what data can reasonably be requested from consumers in the context of such assessments.

In respect of affordability, the call for evidence discusses discretionary and disposable income, and the Commission states that it considers the most relevant way of assessing how much consumers may have to spend before beginning to experience harms as a result of their gambling is through an assessment of discretionary income (i.e. how much an individual has left at the end of the month after accounting for essentials such as taxes, bills, food and accommodation). However, the Commission also emphasises the importance of considering the public data available in relation to household expenditure and disposable income to get an indication of a consumer's likely expenditure based on income.

The Commission also seeks input on what operators should do, as a minimum, to satisfy themselves that their customers are not gambling beyond their means (the Commission believes it will be necessary to specify what operators are required to do to ensure that the assessment provides a good insight into the affordability of a customer's gambling) and what the appropriate thresholds should be.

The Commission does not suggest that it would be proportionate to require customers to undergo affordability assessments for small, infrequent gambling at a level which would be affordable for most of the population, or where it is unlikely to cause financial hardship. Note that the question of proportionality here is focused on the consumer only and not whether it would be proportionate to expect this of the operator, although that is clearly a factor for the Commission to consider.

The consultation suggests that, based on its analysis of a number of statistical surveys, the Commission currently considers that a threshold for the first affordability assessment higher than £2,000 is neither realistic nor acceptable, and that it expects that the evidence might point to a lower threshold, because "it would not be expected that anyone could spend their entire discretionary income on gambling without experiencing harms". A monthly loss of £100 is suggested as the lowest minimum threshold.

In terms of the types of affordability assessments to be required, the Commission suggests the majority will be supported by the use of third party providers to validate or supplement information collected from the consumer directly. Whilst this does alleviate some concerns that operators might be required to conduct sophisticated analysis of disposable income (in the way a mortgage company is required to do), it does raise potential concerns regarding over-reliance on third party providers, and the vagaries of their systems. 

The Commission recognises that consumers will feel inconvenienced or uncomfortable with sharing data required for assessments. It invites responses from consumers on the thresholds at which they would consider that wider consumer protection considerations outweigh the inconvenience or intrusion of providing data. Consumers with lived experience of gambling harm are already playing a considerable part in shaping policy around gambling harms, which is to be welcomed. But it is also hoped that consumers who are able to enjoy gambling without experiencing harms are also willing to engage with the call for evidence.

Affordability and GDPR Considerations

The consultation notes that operators must comply with GDPR when processing customer data for the purposes of affordability assessments. The Commission notes that there is a lack of clarity regarding how Article 22 of GDPR might apply. In broad terms, Art. 22 states that data subjects have a right to object if they are subjected to material decisions as a result of solely automated processing.

The Commission is of the view that placing restrictions on a consumer's ability to gamble does not meet the materiality threshold, and therefore data subjects do not have enhanced Art. 22 rights to object to being denied access to gambling. 

The Commission indicates that if it is wrong on this issue, then it would create a legal obligation for operators to process data in this way (because Art. 22 does not apply where the automated processing activity is authorised by state law, provided that state law also lays down suitable measures to safeguard the data subject's rights and freedoms and legitimate interests). The Commission does not explain how it would ensure that any legal obligation which it may create would appropriately safeguard the rights of individuals under data protection law.

Vulnerability

The call for evidence also addresses the need to better understand the particular vulnerabilities of certain customers, whether generally (e.g. because of a cognitive impairment) or at particular times (e.g. following a bereavement). The Commission expects operators to show greater curiosity in all of their interactions with customers, and greater sophistication in recognising factors which may render a person more vulnerable to gambling harm. An example given is that operators might include questions regarding possible vulnerability at registration, and in subsequent interactions including asking customers if their circumstances have changed or whether they consider themselves to be in a vulnerable position.

Particular scenarios involving vulnerabilities outlined in the call for evidence are not limited to health or capability, but also life events (such as bereavement, financial difficulties, divorce) and product or market-specific vulnerability, where a player may be participating in highly-sophisticated betting markets which are not their normal activity.  In each of these scenarios, and more, it is suggested that reviews, interactions and interventions may be appropriate. The consultation indicates that a key part of the new guidance will be to demonstrate the actions that operators can take when they identify possible vulnerability, and that the implementation guidance will set out a table of example scenarios, details of how an operator may become aware of the scenario and the actions they should take as a result.

The Commission separately proposes to publish a paper outlining its approach to vulnerability, to help operators to understand the issues and risks and to help to raise standards in the area, as available evidence and understanding evolve.

Time Spent

The call for evidence wishes to consider whether and to what extent specific requirements or guidance should be introduced in relation to gambling sessions greater than a specified length on relevant products. The Commission refers to the guidance issued in May 2020 requiring interaction following an hour's play in a single session. This of course was one of the temporary measures introduced to address potential increased risks during the first lockdown caused by COVID-19. The Commission invites consumer views on how disruptive this requirement is.

The regulator cites evidence that indicates that time spent is an indicator of harm and suggests that the time periods for interaction requirements (or guidance) should be tailored to particular products. Poker is an obvious example of a product which requires greater time engagement, and it is clearly contemplated that the thresholds before interaction would be more extended in such products. Arguably, of course, time spent is not a particularly strong indicator of harm at all in some products, but it is important that relevant operators (and consumers, ideally) engage with the call for evidence to make their points.

Prevention of bonus offers

As part of the specific interactions to be suggested in response to certain harm indicators, the Commission proposes that the marketing of bonus offers be suspended for relevant consumers and that those customers be prevented from accepting bonuses. The call for evidence requests input on how effective this might be, and in particular whether it would be fair to require operators to restrict a consumer's access to gambling where they are in the process of qualifying (through gambling) for a bonus.

Unintended consequences

Lastly, the Commission acknowledges, and invites feedback on, the possibility that the restrictions and requirements which it proposes will have unintended consequences. In particular, the Commission recognises that consumers may respond to the imposition of limits arising from affordability assessments by opening multiple accounts with a variety of operators. This is an obvious risk, and could significantly undermine consumer protection by limiting the access of any single operator to the full picture of a consumer's gambling behaviour. Similar issues have arisen in Sweden since the imposition of deposit limits and unfortunately these measures raise a very real prospect of similar issues in Britain.

The Commission counters this by noting that the Single Customer View project could provide the necessary visibility for operators, across a gambler's entire wallet. However, the Commission does not address the data protection and other legal implications of such a data sharing scheme. In any event, there is little doubt that when faced with account restrictions, customers will respond by looking to spend their money elsewhere, hopefully with regulated businesses.

An even greater concern, and one which the Commission does not contemplate, is whether these proposals (if and when implemented) whether on their own, or taken together with the panoply of other regulatory requirements, are actually capable of being complied with in practice.  We fervently support the drive to raise standards, but the pace and variety of change in regulatory requirements in the last two or three years, and the complexity of these particular requirements and those recently announced in relation to High Value Customers, will be challenging for all operators (even the most sophisticated).

The Commission will make no apology for demanding higher and higher standards, and so it should not, but it will also have no sympathy for operators who do not comply. Again, arguably they should all be given short shrift, but the sheer complexity here is concerning.  Also of concern is the apparent switch from outcomes-focused regulation to prescriptive requirements. In our experience, this can be a blunt instrument, and it reflects a significant change in policy from the Commission.

This is an important consultation for the whole industry to engage with. That engagement must be constructive, and it must recognise the importance of the issues at hand. Consumer protection and the prevention of exploitation of vulnerable persons are fundamental challenges for the industry to grasp and to continue to pursue. But there is nevertheless the risk that the outcome of this consultation will place unwieldy and impracticable burdens on the industry and have a disproportionate effect on operators of differing shapes and sizes. The commercial viability of a regulated market is critical to its success, and we are already at the point at which some operators are packing up and leaving the UK market. Many remain, and will meet the increased standards, but channelization and the black market may start to become an issue, especially if consumers don’t like (or cannot pass) the affordability assessments.

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