David Clifton, Licensing Expert: Affordability takes centre stage

David Clifton

In the Gambling Commission’s March 2018 Online Gambling Review, published very shortly after Neil McArthur took over as its Chief Executive, the view was expressed that “overall, progress by the online industry to minimise harm has been significantly slower than we expected and required”.

That set in motion a chain of events that has reached its zenith in the last week or so, culminating – as it has – in a consultation proposal (published on 3 November 2020) aimed at remote gambling operators “to introduce stronger requirements, including that operators must conduct defined affordability assessments at thresholds set by the Commission“.

If implemented (and not much seems to change between the commencement of a Gambling Commission consultation and its post-consultation announcement of forthcoming LCCP changes), such a requirement will result in what could be the biggest ever shock-wave experienced by the UK licensed online gambling sector.

That such a proposal might be advanced by the Commission in advance of the forthcoming government review of the Gambling Act 2005 was probably unimaginable by most in the industry, even as recently as five months ago when the Gambling Related Harm All-Party Parliamentary Group published its final Online Gambling Harm Inquiry report, calling for greater protections for online gamblers and a complete overhaul of gambling regulation in the UK.

One of the APPG’s principal recommendations was that “affordability limits must be set and imposed by the Gambling Commission based on a clear understanding of what is affordable to online users taking into account the gambler’s income, outgoings and circumstances” on the ground that “gauging affordability cannot be left to gambling operators, given the majority of their revenue comes from people who are losing more than they can afford”.

Many in the industry dismissed the APPG’s report as too extreme. After all, they had become accustomed to the Commission taking its cue for action not from a bunch of Parliamentarians who had turned their prime attention to online gambling only after successfully waging war on FOBTs, but instead from the regulator’s formally appointed advisors, the Advisory Board for Safer Gambling.

The ABSG’s most recently published Online Harms Advice” had certainly touched on affordability, advising that “thresholds and triggers should not be set too high [by operators], otherwise many players who might be at-risk of harm will not be flagged early enough”, but it didn’t go anywhere near as far as the APPG’s recommendation.

When thinking about this, let’s not forget it was a rough summer for the Gambling Commission. No sooner had the APPG branded it not fit for purpose than the Chair of the House of Commons Public Accounts Committee described it as “a torpid, toothless regulator that doesn’t seem terribly interested in either the harms it exists to reduce or the means it might use to achieve that”. The House of Lords Select Committee on the Social and Economic Impact of the Gambling Industry didn’t pull its punches either, its Chairman stating that lax regulation of the gambling industry must be replaced by a more robust and focussed regime which prioritises the welfare of gamblers ahead of industry profits”.

It most certainly seems to be payback time now.

I suspect some of those who have historically bemoaned outcomes-focussed gambling regulation may soon be biting their virtual carpets if they find themselves no longer having any discretion to set their own customer affordability check thresholds. That decision would instead be taken by the Commission and we know from the consultation document that (a) a threshold set by an operator in excess of £2,000 is considered by the regulator to be neither realistic nor appropriate and (b) the Commission is thinking it likely that the lowest possible threshold might be “at least £100 loss per calendar month”.

However, opportunity exists for all interested parties to have their say on what the thresholds should be because the Commission has also issued a Call for Evidence on this and other associated customer protection issues.

Other consultation proposals go further in spelling out precisely what the Commission wants its licensees to do. For example, it is proposed that the regulator’s existing remote customer interaction guidance (that came into effect on 31 October 2019) – now augmented by the Commission’s additional formal guidance in May 2020 – will be replaced with a new remote customer interaction ‘manual’ that will “reference the LCCP requirements and set out implementation guidance on how to meet each of these requirements”. 

In my respectful submission, non-remote betting and gaming operators reading this article should not regard themselves as immune from similar treatment at some stage in the future. Experience has shown that the land-based gambling sector is susceptible to collateral regulatory fall-out from Gambling Commission policy developments that have originated as a result of principally online gambling concerns.

This all goes further than that though. Some commentators are already suggesting that, by effectively imposing monthly spending caps on gambling consumers, the introduction of the Commission’s affordability proposal would constitute such a fundamental policy change affecting personal freedoms that it would be constitutionally wrong for it to be considered otherwise than in Parliament as part of the forthcoming government review. If you agree or disagree with that, if you have any relevant views on the consultation proposals or if you wish to respond to the Commission’s Call for Evidence, you have until 12 January 2021 to do so.

However, stick me a while longer please. To the extent that this article provides an update on affordability, it doesn’t end there.

On 6 November 2020, the Gambling Commission published (belatedly due to the Covid-19 pandemic) its annual Compliance and Enforcement Report. The chapter entitled Triggers and customer affordability should be read from top to bottom because – if recent multi-million pound fines and financial penalties weren’t enough – this spells out in the clearest possible terms yet exactly what the Commission’s current expectations are, quite regardless of what they are likely to become in the future.

That same message is rammed home in the Commission’s first-ever “National Strategic Assessment”, published on the same day. This makes clear the regulator’s opinion that “individuals spending more than they can afford to lose is one of the harms most associated with gambling. Harm can be significant even at low spending levels as the level of spend at which harms begin to occur depends on the consumer’s discretionary income”.

Operators who still have affordability check thresholds set in the thousands of pounds (or other levels that do not take account of the affordability of a typical consumer) would be well-advised to check out a table within “The person gambling – Customer affordability” section of the National Strategic Assessment that shows the percentage of discretionary income (i.e. how much an individual by age has left at the end of the month after accounting for taxes, bills, food and accommodation) using January 2020 YouGov survey data. It also summarises case study examples of ineffective control frameworks that have resulted in regulatory action against operators, in which common issues include “interventions not happening in a timely way with customers flagged as needing an interaction, but this not happening until the next day, or later, after the customer had spent life-changing sums of money”.

Again, I add a note here for the attention of land-based operators. Tucked away in the National Strategic Assessment is the following message to them from the Commission: “Covid-19 has had a severe impact on premises-based gambling and the full impact of this on consumer behaviour is not yet known. As premises reopen and adapt to the new environment there is an opportunity for land-based gambling to make a case for creative solutions to enhance their products and services in a way which goes hand in hand with enhanced consumer protections”. Plenty to think about there.

Before we part company, a quick reminder of other relevant developments over the last month or so (with links to find out more about each of them):

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David Clifton – Director – ‎Clifton Davies Consultancy Limited

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