Affordability questions explored at KnowNow’s ‘Compliance Forum’


Further to our previous posting entitled ‘A practical conversation about affordability’, at KnowNow’s ‘Compliance Forum’ yesterday (28 June 2022):

  • David Clifton had the pleasure of moderating a panel session bearing that very same title and
  • a keynote ‘Regulatory Review’ presentation was made by Mandy Gill, Director of Compliance at the Gambling Commission.

We will summarise below relevant matters arising in each of those respects.

1. A practical conversation about affordability

In the below photograph, David (on the far left) is shown with his panellists (from left to right) Melanie Ellis (Partner, Northridge Law), Ben Wright (Head of Safer Gambling, Sky Betting & Gaming), Tom Farrell (Chief Marketing Officer, ClearStake) and Neil Tyson (Director, Rightway Compliance):

David opened the session with the following Qs&As by way of a ‘Quick introduction to affordability’:

Q1: What’s the word ‘affordability’ mean? That might sound like a stupid question but it’s one a lot of people ask in the context of use of that word in the field of gambling.

A1: A standard dictionary definition is: ‘The state of being cheap enough for people to be able to buy

Q2: What does the Gambling Commission mean by ‘customer affordability assessments’?

A2: The Commission is talking in terms of UK licensed gambling operators assessing whether an individual customer is spending more than he or she can afford to lose

Q3: Why is that important?

A3: The Commission describes unaffordable gambling as ‘one of the harms most associated with gambling’.

Q4: How do you measure when unaffordable gambling causes significant harm?

A4: The Commission says that harm can be significant even at low spending levels, because the level of spend at which harms begin to occur depends on the consumer’s discretionary income.

Q5: What is ‘discretionary income’?

A5: It is how much an individual has left at the end of the month after accounting for taxes, bills and housing/accommodation costs. Add to that other items such as fast-increasing heating, fuel and food costs as inflation takes hold and it’s clear that someone’s level of discretionary income is unlikely to remain static, as a result of which affordability checks need to conducted throughout the lifetime of a customer relationship.

Q6: What is the problem?

A6: The GC first identified in its customer interaction guidance (published in July 2019) that licence-holders were not identifying sufficiently early that customers were spending more on gambling than they could afford because they were relying on deposit or loss thresholds that were set too high.

Q7: So what should financial thresholds be?

A7: The GC said in that guidance (both 3 years ago and in its new remote customer interaction guidance published on 20 June 2022): ‘Thresholds should be realistic, based on average available income for your customers. This should include the Office of National Statistics publications on levels of household income’

Q8: Was the GC not going to set financial thresholds?

A8: It was certainly thinking about it. It issued a Call for Evidence in November 2020 in which it proposed that remote operators should be required to conduct affordability assessments at thresholds set by the GC. It said then that it did not consider a threshold in excess of £2000 to be ‘realistic or appropriate’, and that ‘the evidence base may point to a threshold considerably below this’. At the other end of the scale, it said that that ‘it would be proportionate to require customers to be subjected to affordability assessments for small, infrequent gambling at a level which would be affordable to most of the population, or where gambling at those levels is extremely unlikely to cause financial hardship’, adding that ‘the lowest possible threshold is likely to be at least £100 loss per calendar month’.

Q9: Didn’t the GC say that customers wishing to spend more than the national average should be asked to provide information such as P60s, tax returns or bank statements to support a higher affordability trigger?

A9: Yes it did, in its Compliance & Enforcement Report also published in November 2020. However, the Gambling Minister Chris Philp MP appeared to contradict this a year later at the GambleAware Annual Conference on 8 December 2021, adding that ‘because people’s circumstances differ, affordability checks need to be proportionate’.

Q10: So what will be the GC be doing next?

A10: At KnowNow’s September 2021 conference on Social Responsibility for Gambling Operators, GC Executive Director Tim Miller said that the GC will be conducting a further consultation on ‘thresholds for identifying key financial risks’, commenting that: “…. Our planned next step will be a consultation on thresholds for identifying key financial risks:

    • when it comes to significant losses in a very short time [now called ‘binge gambling’],
    • significant losses over time [now referred to as ‘clearly unaffordable gambling over time] and
    • financial vulnerability”.

It’s a long-promised consultation but is yet to arrive with no greater clue on precise timing (other than ‘shortly’) being provided by the Commission when publishing its updated Customer Interaction Guidance for Remote Operators on 20 June 2022.

Q11: What about affordability proposals in the Government’s forthcoming Gambling Reform White Paper?

A11: The GC’s response to its Remote Customer interaction consultation, published in April 2022, said that it would “work closely with Government to ensure that the consultation proposals are set in the wider context of the Government’s Review of the Gambling Act 2005”. However, based on comments made earlier in the day within a keynote ‘Regulatory Review’ presentation by the Gambling Commission’s Director of Compliance, Mandy Gill, it seems unlikely that the previous proposal that operators will be required to conduct affordability assessments at thresholds set by the Commission will re-emerge. Instead, she emphasised that operators should be prepared to explain to the Commission why it is that, with their customer base, the financial thresholds that they adopt for affordability purposes are acceptable.

Subsequent discussion amongst the panellists addressed the following questions that, apart from the first one, had been posed in advance by attendees at previous KnowNow conferences to the ‘Compliance Forum’ organisers:

  1. A tweet by the Betting and Gaming Council yesterday said: “Millions enjoy a flutter and the vast majority do so safely. Voters are tired of politicians telling them how to spend their hard-earned money”. Is it as simple as that?
  2. Do we need a standardised approach to affordability?
  3. When and how should affordability checks be performed?
  4. What are the commercial sensitivities associated with different approaches to affordability checks?
  5. What information is available to operators to make decisions and what kind of information and documents do we need to ask customers to provide?
  6. How do operators deal with customer resistance to providing information?

2. Keynote ‘Regulatory Review’ presentation by Mandy Gill, Gambling Commission Director of Compliance

Topics covered by Mandy Gill in her ‘Regulatory Review’ presentation (and questions arising from it) included the following:

  1. Recent regulatory failings, resulting in enforcement action against UK licensed gambling operators, have not been as ‘historic’ as has often been claimed, with examples of such failings including no interactions having been conducted in circumstances where:
    • no triggers had arisen despite a customer having gambled for 19½ hours in a 24 hours period, 10½ of which had been continuous,
    • a total of £16,000 having been lost by a customer within a couple of weeks, without any interaction having occurred, as a result of which the operator had no knowledge whether the funds used were legitimate, and
    • more than £33,000 having been lost in a three-month period by a customer whose annual gross income was £28,000.
  2. A fresh round of Gambling Commission compliance assessments will start in the Autumn, the implication being that this was referring to compliance assessments of UK licensed remote gambling operators
  3. The Commission’s perception is that, in the absence of enough good practice examples being provided to it, no-one within the industry is looking to shape ‘gold practice leadership’ which explains why media stories of gambling-related harms continue to dominate the headlines
  4. The Commission:
    • is looking for a great deal more from its licence-holders in relation to ‘evaluation’, i.e. in order to show what they are doing to measure the impact of their customer interactions and other safer gambling measures and
    • considers investment in training for staff to be a key requirement, as too is the value of senior management listening to what their staff tell them about what is, and is not, working in the above-mentioned respects.
  5. The Commission’s forthcoming annual Compliance & Enforcement report will focus on the ‘fair and open’ licensing objective, with a particular emphasis on:
    • blocked withdrawals,
    • lack of evaluation in relation to safer gambling measures,
    • marketing to vulnerable customers and
    • tools available to assist operators to promote the licensing objectives.
  6. Changes in approach by the Commission in relation to:
  7. Recent comments made by Marcus Boyle, Chair of the Gambling Commission In an op-ed piece for The Times published on 23 May 2022, entitled Gambling needs better regulation, and this is how we will do it’, (as previously reported by us here) including the following matters on which the Commission will be conducting advance consultations:
    • increasing the impact of sanctions imposed on persistently failing operators,
    • increased financial penalties and a suite of sanctions aimed at changing behaviour (including fines being based on a percentage of customer takings, short or long-term suspensions and attaching significant conditions to licences), and
    • full board oversight and personal accountability through increased personal management licences at strategic and operational levels
  8. Annual assurance statements, in relation to which:
    • the Commission found (in relation to last year’s such statements) that whilst some had been signed off at board level, what had been said within the statement did not ‘stack up’ with what was found during subsequent compliance assessments conducted by the Commission, as a result of which the regulator will look to involve the ‘wider boards’ of its licence-holders in future, and
    • the Commission will in future move away from longer form assurance statements of the type it has used previously, introducing instead a shorter form statement inviting ‘yes’/’no’ answers with regard to the extent to which an operators is assured that it is meeting the licensing objectives; adding that it is better that an operator is honest if it is not so assured, and explains what it is doing to rectify this and within what time frame it will do so.
  9. The Commission wishes to see more conversations taking place between the industry and the regulator, including a willingness to meet and talk about issues related to ‘raising standards’, adding that the Commission’s Chair, Marcus Boyle, is particularly keen to look at examples of good algorithms employed by operators in that respect.