Insights Affordability and the direction of regulatory travel


The Gambling Commission has posted its first reaction to its recently-concluded Consultation on the issue of affordability. The ‘Update’ is very much an interim press release sort of document but it does contain some substantive statements about where the Commission’s thinking is and what we can expect going forward.

First, the encouraging news.

The Commission received some 12,000 responses to their ‘short survey’. It is to be hoped that as many as possible of these responses will be from the overwhelming majority of customers who enjoy a harmless bet from time-to-time and who balk at the idea of having to respond to intrusive and disproportionate financial enquiries when they are in absolutely no danger of ‘harm’. The Commission seem also to have taken on board issues of evidence and objectivity: they take pains to signpost that ‘We have carefully considered the responses’ and they note widespread concerns around proportionality, the need for a targeted approach, freedom of choice and privacy. The Commission comments, in response to all of this, ‘We take that seriously’.

Let us hope that this is so.  A renewed commitment to the balance demanded by statute – between the right to provide and enjoy gambling and the need to uphold the licensing objectives – would be very welcome, and a return to the sort of objectivity that the Commission’s own ‘Statement of Principles’ (not to mention the Gambling Act itself) appears to demand.

Secondly, the bad news.

In general terms, there is no indication that the Commission have listened to the calls from all sides appealing for them to roll up the issue of ‘affordability’ into the DCMS’s ongoing wider review of gambling. Deciding how much people should be allowed to spend on a leisure activity, or, put another way, deciding, on behalf of society, that an activity is one where the state should prevent people exercising their freedom to choose, is clearly a political matter and therefore the prerogative of Government.

In this light, the Commission have, therefore, concluded that ‘stronger requirements are needed for operators to identify a range of indicators of harm and take appropriate action more often and at an earlier stage’. This is – of course – not ‘bad news’ in the sense that operators accept that they should be required  to take reasonable steps to prevent harm, but it is certainly bad news in that this ‘conclusion’ has been reached, so far as we know, without any of the impact-assessments, cost-benefit assessments, evaluations of the effect of existing measures, anticipation of likely harm to the industry and projection of likely adverse unintended consequences – having been undertaken. As the National Audit Office pointed out to the Commission recently, the Commission persists in forging ahead with ever more onerous regulation without any researched understanding of the potential of existing regulation, or the potential of operator-driven technology and data manipulation, to address the issue of financially unsustainable gambling in a targeted and sophisticated way.

The question of proportionality therefore also looms large. Industry stats and projections demonstrate that there is a clear risk of unintended consequences here and not just inconvenience and cost for operators. There are real concerns about consumer reaction and the creation of a genuine incentive for gamblers to seek out unlicensed operators. This is against a background of declining statistics for ‘harm’: the Commission’s interim CEO, Sarah Gardner, acknowledged recently that the rate of problem gambling has fallen from 0.6% to 0.4%, the rate of moderate risk gambling from 1.5% to 0.6% and low risk gambling from 2.7% to 1.9%. It must surely be crucial to this debate for everyone to understand how and why these reductions are already occurring. What has driven them? Which bits of the current regulatory regime have caused this decline? How can we best capitalise upon whatever it is that is working, and seek to turbocharge it?

Many of the responses to the Consultation pointed out that proper, objective, evidence-based and reasoned regulation cannot be conducted in this knowledge vacuum. How do we know that new measures are needed without any understanding of how effective, say, the updated July 2019 customer interaction guidance has been? Or the tightened VIP regulations? Or the ban on credit cards and reverse-withdrawals? Or the Commission’s vigorous programme of enforcement actions and financial sanctions? Or the Commission’s COVID guidance? A need for new regulatory burdens can surely only be identified when one is confident that those currently in place are inadequate. The Commission seems quite relaxed about continuing to make regulations in the absence of this crucial evidence.

That said, there is something of a shift in the Commission’s tone. This press release seems to be creating some width for manoeuvre on the part of the Commission. The three ‘key risks’ identified by the Commission are phrased in much more judicious terms than many of the Commission’s previous broad statements on the same subject.

The first ‘key risk’ is ‘significant losses in a very short time’, something which the Commission acknowledges is ‘relatively rare’. Existing systems are set up to flag heavy losses over short periods of time and keeping a better track of this is hardly the end of the world: many operators already have triggers, thresholds and glass ceilings in place. It remains regrettably true, however, that failings continue to occur and it remains incumbent on operators to test their systems to address speed of spend as well as the amount. But again, it is crucial to understand these failings. Are they (as the writer suspects) deficiencies in the implementation of current regulations or are they practices which are not yet regulated but should be (thereby suggesting the need for additional regulation)? The joint ‘public statements’ issued by the Commission and its licensees after regulatory enforcement suggest that the problems that continue to occur represent shortcomings in the implementation of existing regulation. That suggests that improved systems and procedures are the answer, further building on the undeniable improvements in social responsibility compliance effected by the industry and the regulator over the last five years.

The second ‘key risk’ is ‘significant losses over time’ which is a variation on the above. Again, this is something ‘experienced by a relatively small proportion of customers’.

The third risk is ‘financial vulnerability’ and it is in this wording that a more considered attitude on the part of the Commission seems to have taken root. In the first place, the wide concept of ‘vulnerability’ has been narrowed to ‘financial vulnerability’, something which returns official thinking to the actual understanding of the draftsmen of the 2005 Act, who had in mind persons at actual risk of addiction and harm. The second encouraging nuance in this section is the explicit link between ‘financial vulnerability’ and ‘likelihood of harm’, the point being that it is much easier for gambling businesses to identify proxies for harm manifest in players’ behaviour than it is to discover whether a person has, for example, difficulties with numeracy or literacy that does not manifest in those aspects of their behaviour detectable by an online gambling business.

The conclusion to all of this is that the Commission will, this summer, put forward proposals in two areas. Firstly, in relation to taking action where customers ‘are known to be in a vulnerable situation’. Secondly, in relation to ‘thresholds for operators to take action and guidance on what those actions should be’. How these two concepts will work out in practice remains to be seen. But there is at least some nuance in the Commission’s text that gives hope that the Commission may be rowing back somewhat from the de facto affordability ‘handbrake’ mandated in their 2018/19 ‘Enforcement Report’ and the Soviet idea that gambling companies must calculate everyone’s household budget and decide on their behalves how much each individual should be spending on “sinful” gambling from the start

The Commission refers to ‘broader public policy questions’ being the prerogative of the DCMS. The hope must be that mandatory low-level affordability enquiries whereby huge numbers of customers at no risk of harm would see their accounts suspended for no reason, has now been put into this basket. That would be entirely appropriate because any regulation along these lines risks such harm to both the consumer and industry that it should properly be the preserve of the legislature.


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