On 3 November 2020, the Gambling Commission (the “Commission”) announced a consultation and call for evidence on customer interaction by remote operators, with a view to introducing stronger requirements for identifying and protecting customers who may be at risk of gambling related harm. If implemented, the proposed measures will cause significant changes to the gambling industry.
To assist with the consultation, the Commission is calling for evidence and states that it is particularly keen to hear from consumers as to how operators should be required to identify when customers are gambling beyond their means, as well as the circumstances in which they would consider it appropriate for operators to take action to prevent harm.
The Commission has also recently published its first National Strategic Assessment (the “Assessment”) and its Compliance and Enforcement Report 2019-2020 (the “Enforcement Report”) both of which address (among other issues) customer interaction and affordability. We have highlighted key relevant points from the Assessment and Enforcement Report below and our full article is available here.
The Commission’s concerns
The Commission recognises that some operators have improved their customer interaction processes following its guidance published in July 2019. However, the Commission reports that it is still finding operators not taking appropriate action, or acting quickly enough upon identifying potential harm to a customer.
The Assessment highlights that the Commission’s compliance and enforcement teams continue to encounter cases of customers displaying indicators of gambling related harm, who, in most cases, were funding their gambling through unsustainable sources.
In particular, the Commission stated that its casework had identified that operators, in implementing policies and procedures around customer interaction, were:
setting financial thresholds for customer interaction at levels it considered to be too high (in some instances, at tens of thousands of pounds);
failing to act on information about a customer’s potential vulnerability, or not interacting quickly enough (after life changing sums of money have been lost, in some cases); and
failing to take into account the data available on customers’ affordability levels.
The Commission’s stated aim of the consultation is to ensure that minimum standards are implemented consistently across the gambling industry.
The Commission considers that stronger requirements need to be introduced to enable operators to identify customers at risk of problem gambling, interact with them and take action sufficiently early to prevent harm.
The Commission proposes to impose the following requirements on operators:
To implement effective customer interaction processes: Operators are already required to conduct customer interaction, on an ‘identify, interact, evaluate’ basis (Social Responsibility Code provision 3.4.1). The Commission is considering imposing an additional requirement on operators, that they must implement effective processes which reflect the ongoing nature of customer interaction.
To have effective systems and processes in place to identify harm: The Commission already expects operators, in its Customer Interaction Guidance, to use a range of indicators. The Commission proposes that operators must have effective processes in place to monitor customers and identify when they are at risk of harm. Customer activity must be monitored from account opening, with risk indicators flagged in a timely manner. The Commission suggests that operators must use indicators relevant to their consumer base, such as consumer spend, use of gambling management tools, and time spent gambling.
To follow set requirements for specific indicators of harm: To assist operators with identifying customers at risk of harm, the Commission proposes requiring that operators monitor specific indicators of harm. In addition, the Commission proposes to set specific requirements in relation to three indicators of harm which it considers key: affordability, vulnerability of customers and time spent gambling. These proposals would have major ramifications for the gambling industry and we expand on them below.
To take appropriate action in a timely manner: The Commission proposes that operators are required to take action in a timely manner, with interactions tailored depending on the indicators of harm flagged. The Commission has suggested new categorisations for interactions, which range from early generic interactions (including pop-ups) to implementing time out on behalf of a customer or ending the customer relationship at the other end of the scale. It is emphasised that interactions should not necessarily take place on a gradually increasing scale, but that operators should take strong action (such as closing an account) straight away if necessary.
To evaluate the effectiveness of interactions: The Commission suggests that operators should be required to monitor changes in customers’ play, and to trial different approaches to customer interaction to consider which is most effective.
Indicators of harm: specific requirements
The most significant proposal is that the Commission will impose on operators the requirement to conduct affordability assessments at specific financial thresholds set by the Commission.
The Commission is concerned that “individuals spending more than they can afford to lose is one of the harms most commonly associated with a gambling disorder” and stresses the importance for operators to take into account discretionary income, considering this a key factor in determining whether a customer is at risk of experiencing harm. The Commission considers that it “would not be expected that anyone could spend their entire discretionary income on gambling without experiencing harms”. The Commission is requesting evidence to explore how to minimise this risk.
The Assessment also emphasises that harm to customers can be significant even if the level of spend is low, as it is dependent on how much someone can afford to lose (which can be ascertained by reference to the customer’s discretionary income).
The Commission reminds operators in its Assessment that discretionary income is “how much an individual has left at the end of the month after accounting for taxes, bills, food and accommodation” and relies on figures from a YouGov survey in January 2020 which identified that 20% of 25-34 year olds and 25% of 35-44 year olds have less than £125 discretionary income per month.
As for the proposed affordability thresholds, the Commission does not consider that these checks should be implemented at the commencement of a customer relationship (i.e. on a ‘licence to gamble’ basis). The consultation indicates that the lowest affordability threshold that would be considered would be £100 loss in a month, and the highest threshold at £2,000 loss in a month. The Commission reaches this top figure on the basis that 98% of the population have discretionary income lower than £2,000 per month (as per the YouGov survey in the Assessment). It is expected that once the proposed threshold is reached, an operator will be required to obtain information from the individual to confirm that the level of play is affordable for them before they would be allowed to continue gambling.
The Commission’s recently published Enforcement Report details the Commission’s current expectations regarding affordability assessments. The Report identifies concerns that operators are currently using “complex matrices and mapping” for affordability frameworks, which do not encompass customer interaction to understand a customer’s true affordability. Whilst the Commission recognises that open source data can be of benefit in setting affordability triggers to encourage early engagement with customers, this should not be viewed in isolation. The Commission emphasises the need for the affordability of customers to be assessed by interaction with customers as well as through open source data to ensure informed affordability triggers can be set. The Commission states that a customer must be able to appropriately evidence if they are able to spend more than the national average, for example by providing three months’ payslips, P60s, tax returns or bank statements.
For customers in a loss position, the Enforcement Report suggests assigning these customers the national average affordability trigger, with the customer able to move to higher triggers once evidence to show they can afford their level of spend has been obtained. The Commission expects affordability to still be a consideration for customers in a profit position, but notes (subject to social responsibility and/or money laundering concerns) that operators may deem customers in a profit position are able to afford their level of spend due to their winnings.
The Commission recognises that customers may not be willing to supply personal financial data to gambling companies. It also acknowledges the need to ‘strike the right balance’ between consumer freedoms and ensuring appropriate protections are in place to prevent gambling related harm. Mandatory affordability thresholds would be a significant curb on consumer freedom.
The Commission’s definition of a vulnerable customer 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”. The Assessment emphasises that vulnerability can be permanent, temporary or intermittent, and that a recent survey indicated that 46% of adults had one or more characteristics of vulnerability. As such, under the Commission’s definition this is a key indicator of harm which may impact on a large proportion of an operator’s customer base.
Although the Commission recognises that operators may not always have the relevant information available, it expects operators to take this definition into account when considering the factors that might make a customer more vulnerable to experiencing gambling harm and to make use of information received from all sources (for example via customer service and chat functions).
The Commission sets out the following categories of vulnerability, and expects that operators implement effective processes to take action where indicators are identified:
Health, such as poor physical or mental health;
Access and capability, including poor literacy or numeracy skills;
Life events, such as experiencing a bereavement or divorce; and
Market related, such as if an individual is engaged in a highly complex activity.
The Commission proposes a requirement for operators to monitor time spent gambling and to take action after a certain period of time, recognising that this will differ depending on the nature of the gambling product. This builds on the customer interaction guidance published in response to the COVID-19 pandemic in May 2020 which requires operators to review its time indicators to capture play in excess of 1 hour on the basis it is a proxy for potential harm.
The Commission is proposing to introduce new Social Responsibility Code requirements into the Licence Conditions and Codes of Practice (“LCCP”) to stipulate the specific measures that operators will be required to deliver. Additionally, the existing guidance on customer interaction would be replaced with a new manual, which will bring together LCCP requirements and revised guidance.
This is an important consultation as it could lead to significant changes for the gambling sector, the most noteworthy being the potential for affordability checks to be enforced on operators, at thresholds set by the Commission.
It is crucial for the industry as a whole to engage with the consultation, as it raises important questions about balancing consumer freedoms with protecting the vulnerable.
The consultation is open for 10 weeks, closing on 12 January 2021. It is anticipated that there will then be a further 4 week consultation to deal with the final draft requirements and guidance, including the level of thresholds for affordability assessments.
To take part in the consultation, please click here.