New UKGC Remote Customer Interaction Guidance published – Don’t wait until September to read it!

As reported by us on 15 April 2022 in our website posting entitled ‘New customer interaction requirements for UK licensed remote gambling operators take effect in September 2022‘, revised customer interaction requirements (set out in a new LCCP Social Responsibility code provision 3.4.3) will come into effect on 12 September 2022 and will apply to remote operating licences granted by the Gambling Commission, with the exception of:

  • remote lottery licences the holder of which does not provide facilities for participation in instant win or high frequency lotteries,
  • remote gaming machine technical,
  • remote gambling software,
  • remote host,
  • ancillary remote bingo,
  • ancillary remote casino,
  • ancillary remote betting,
  • remote betting intermediary (trading rooms only) and
  • remote general betting limited licences.

The Commission stated at the time that new customer interaction guidance for remote gambling licensees, of which all affected UK licensed remote operators will be required to take account, would be issued in June of this year with the aim of helping such operators to understand and comply with the new requirements, in relation to which the regulator stated: “we will engage with operators to enable the guidance to take account of queries we receive about the requirements following publication”. 

That new guidance (that you can download below) has been published today, 20 June 2022. Announcing its publication, the UKGC has stated as follows on its website:

New guidance published ahead of rule changes to protect consumers 

New consumer protection guidance, which gambling businesses are required to take account of, will help them comply with new rules coming into effect in September.

In April the Commission announced new rules to ensure online gambling businesses do more to identify and take action to protect customers at risk of harm. The updated consumer protection guidance released today will help gambling businesses understand and comply with the new rules, which come into effect on 12 September.

The existing guidance and additional guidance issued during the COVID-19 pandemic will still apply and be available for operators to refer to until 12 September.

The new guidance provides further information for remote gambling businesses on:

  • identifying vulnerable customers
  • indicators of harm they must monitor for, including what is considered a ‘strong’ indicator of harm
  • when to use automated systems and processes
  • how to evaluate the impact of customer interactions.

Gambling Commission Chief Executive Andrew Rhodes said:

“Operators must take account of this guidance ahead of the stronger requirements coming into effect. We are giving the industry time to prepare for the changes and expect full compliance by September. Every gambling business has a role to play to prevent gambling harm and this guidance makes clear what we expect to see, which will be supported with enforcement action should we need it. In the current context, including the rise in the cost of living, it is more important than ever for operators to meet these requirements to identify customers at risk of harm.”

The new guidance forms part of the Commission’s ongoing drive to make gambling in Britain safer. The Commission will shortly be launching a further consultation on the ways to tackle three key financial risks for consumers: binge gambling, significant unaffordable losses over time, and risks for those who are financially vulnerable.

This forms part of a wider programme of work by the Commission to drive and support industry best practice in identifying customers at risk of harm and taking action. This programme of work also includes:

  • supporting the development of an industry led solution to the Single Customer View challenge through the Information Commissioner’s Office sandbox process and working with the gambling industry to evaluate the approach they develop
  • working with the industry on best practice algorithms for using algorithms to identify harm and ensure compliance with the requirements.

The content of the guidance is split into the following sections:

  1. Introduction
  2. Section A – General requirements
    • Section A – General requirements – Requirement 1
      • Licensees must implement effective customer interaction systems and processes in a way which minimises the risk of customers experiencing harms associated with gambling. These systems and processes must embed the three elements of customer interaction – identify, act and evaluate – and which reflect that customer interaction is an ongoing process as explained in the Commission’s guidance (see paragraph 2).
    • Section A – General requirements – Requirement 2
      • Licensees must take into account the Commission’s guidance on customer interaction for remote licensees as published and revised from time to time (“the Guidance”).
  3. Section B – Identify
    • Section B – Identify – Requirement 3
      • Licensees must consider the factors that might make a customer more vulnerable to experiencing gambling harms and implement systems and processes to take appropriate and timely action where indicators of vulnerability are identified. Licensees must take account of the Commission’s approach to vulnerability as set out in the Commission’s Guidance.
    • Section B – Identify – Requirement 4
      • Licensees must have in place effective systems and processes to monitor customer activity to identify harm or potential harm associated with gambling, from the point when an account is opened.
    • Section B – Identify – Requirement 5
      • Licensees must use a range of indicators relevant to their customer and the nature of the gambling facilities provided in order to identify harm or potential harm associated with gambling. These must include: (a) customer spend, (b) patterns of spend, (c) time spent gambling, (d) gambling behaviour indicators, (e) customer-led contact, (f) use of gambling management tools and (g) account indicators.
    • Section B – Identify – Requirement 6
      • In accordance with SR Code 1.1.2 licensees are responsible for ensuring compliance with the requirements. In particular, if the licensee contracts with third party business-to-business providers to offer part of the facilities for gambling, the licensee is responsible for ensuring that systems and processes are in place to monitor the activity on the account for each of the indicators in paragraph 5 (a-g) and in a timely way as set out in paragraphs 7 and 8.
    • Section B – Identify – Requirement 7
      • A licensee’s systems and processes for customer interaction must flag indicators of risk of harm in a timely manner for manual intervention, and feed into automated processes as required by paragraph 11.
  4. Section C – Act
      • Section C – Act – Requirement 8
        • Licensees must take appropriate action in a timely manner when they have identified the risk of harm.
      • Section C – Act – Requirement 9
        • Licensees must tailor the type of action they take based on the number and level of indicators of harm exhibited. This must include, but not be limited to, systems and processes which deliver: (a) tailored action at lower levels of indicators of harm which seeks to minimise future harm, (b) increasing action where earlier stages have not had the impact required, (c) strong or stronger action as the immediate next step in cases where that is appropriate, rather than increasing action gradually, (d) reducing or preventing marketing or the take-up of bonus offer where appropriate, (e) refusing service or ending the business relationship where necessary.
      • Section C – Act – Requirement 10
        • Licensees must prevent marketing and the take up of new bonus offers where strong indicators of harm, as defined within the licensee’s processes, have been identified.
      • Section C – Act – Requirement 11
        • Licensees must ensure that strong indicators of harm, as defined within the licensee’s processes, are acted on in a timely manner by implementing automated processes. Where such automated processes are applied, the licensee must manually review their operation in each individual customer’s case and the licensee must allow the customer the opportunity to contest any automated decision which affects them.
  5. Section D – Evaluate
      • Section D – Evaluate – Requirement 12
        • Licensees must implement processes to understand the impact of individual interactions and actions on a customer’s behaviour, the continued risk of harm and therefore whether and, if so, what further action is needed.
      • Section D – Evaluate – Requirement 13
        • Licensees must take all reasonable steps to evaluate the effectiveness of their overall approach, for example by trialling and measuring impact, and be able to demonstrate to the Commission the outcomes of their evaluation.
      • Section D – Evaluate – Requirement 14
        • Licensees must take account of problem gambling rates for the relevant gambling activity as published by the Commission, in order to check whether the number of customer interactions is, at a minimum, in line with this level. For the avoidance of doubt, this provision is not intended to mandate the outcome of those customer interactions.

Each of the above requirements are broken down into “Aims” and “Formal Guidance’ sub-sections and, in some cases, with an ‘Additional Guidance and Information’ sub-section too. In terms of immediate comment on the new guidance, we will focus on the following three aspects:

Requirement 4: Affordability

In relation to the issue of affordability within Requirement 4, the UKGC adds little to its existing guidance, although it makes clear that guidance on financial risk will be updated following further consultation on measures to address gambling harm associated with financial risks of binge gambling; clearly unaffordable gambling over time and financial vulnerability”. So, as anticipated following publication of the response to its Remote Customer Interaction Consultation in April, we have no greater clarity yet in relation to the regulator’s expectations in relation to where operators should be setting thresholds for affordability assessments.

As matters stand, it merely states as follows within the new guidance in relation to affordability:

Licensees should aim to identify those experiencing or at risk of harm and intervene to reduce harm at the earliest opportunity. Reliance on deposit or loss thresholds that are set too high will result in failing to detect some customers who may be experiencing significant harms associated with their gambling. It is therefore imperative that threshold levels are set appropriately.

Historically, gambling licensees have not systematically considered customer affordability when developing their customer interaction policies. Many have used deposit or loss thresholds as a main or sole prompt for a customer interaction, but these have often been set at levels that were inappropriately high, in comparison to the average amount of money that the majority of people have available to spend on leisure activities. This has led to a number of examples of customers spending more than they could afford, and this not being identified sufficiently early, as seen in much of the Commission’s compliance and enforcement casework .

Open source data exists which can help licensees assess affordability for their GB customer base and improve their risk assessment for customer interactions. 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.

In considering these thresholds, you should be aware of the difference between ‘disposable income’ and ‘discretionary income’ which refers to the amount left after living costs are taken into account, but it does still include many other unavoidable costs. Most people would consider it harmful if they were spending a significant proportion of their discretionary income on gambling. We expect that guidance on financial risk will be updated following further consultation on measures to address gambling harm associated with financial risks of binge gambling; clearly unaffordable gambling over time and financial vulnerability. Licensees should be considering how they manage those risks now.

We must all await to establish what further detail in this respect is provided in the Gambling Commission’s long awaited ‘financial vulnerability’ consultation and/or the equally long awaited UK Government Gambling Act Reform White Paper.

Requirement 9: Range of actions in response to identified harm

The UKGC states that there are two key aims of this requirement, namely:

  1. to set minimum requirements for the type of action that must be included within a licensee’s systems and processes to minimise harm
  2. to ensure that a licensee’s response is proportionate to the indicators of harm.

It goes on to say that:

  • “licensees have a range of actions they will apply in response to identified harm” and
  • “this measure requires licensees to have the following suite of actions in place”:
  1. Early generic action, adding that “actions at this level may apply to all customers, or where there are only very low levels of indicators of harm. It would include:
    • pop-ups
    • safer gambling emails promoting gambling management tools
    • generic safer gambling messages
    • having in place backstop protections or limits while checks are being undertaken”.
  2. Early tailored action, applicable “at lower levels of indicators of harm which seeks to minimise future harm”, adding that “actions at this level would include:
    • the licensee encouraging the customer to use the gambling management tools they offer
    • sharing information on spend or behavior to encourage change and enhancing their knowledge and monitoring of the customer”.
  3. Medium tailored action, i.e. “increasing action where earlier stages have not had the impact required. Actions at this level would include:
    • phone calls to conduct a customer interaction
    • tailored encouragement for the customer to consider behaviour
    • signposting to help and support
    • preventing direct marketing or access to new bonus offers”.
  4. Strong or stronger action, describing this as “the immediate next step in cases where that is appropriate, rather than increasing action gradually. Actions at this level would include:
    • requiring the customer to set a spend limit
    • providing hot transfers to help and support (so the customer can be transferred without requiring them to dial again)
    • using technological solutions to help support a customer for example by reducing the visibility of products in a tailored way
    • preventing the take up of offers or incentives
    • setting spend limits or setting time outs on behalf of a customer.
  5. Very strong, explaining that “ultimately, if the licensee’s concerns about a customer persist because the licensee’s actions have not resulted in sufficient protections in place or behaviour change by the customer, the licensee should refuse service or completely end the business relationship. In these cases, signposting to support and help will be important”.

In terms of providing examples of types of action at increasing strength levels, the UKGC provides the following visualisation (in the same form as it appeared in the regulator’s Call for Evidence in relation to remote customer interaction requirements and guidance, published in 2020, as reported by us here):

Requirement 14: Evaluate taking into account PG rates for the relevant activity published by the GC

The starting point is that customer interaction is designed to identify customers at risk of harm. The UKGC states within the new guidance that:

  • “if the licensee’s systems do not identify numbers of customers at least in line with the problem gambling rates for the relevant activity, those systems are likely to be failing to identify the right proportion of customers” and
  • “this requirement provides a backstop protection – to ensure that customer interaction takes place as a minimum for the proportion of the customer base as the problem gambling rate for the gambling activity (or activities)”.

Its guidance in this respect is worth setting out in full below because remote operators will encounter major problems if future compliance assessments by the Gambling Commission reveal that they are not meeting this requirement:

Systems and processes must be designed to, as a minimum, undertake customer interactions with at least the same proportion of their customer base as the problem gambling rate for the gambling activity or activities they offer. Because licensees should be identifying people at risk of harm the proportion of customers who receive a customer interaction should be greater than the problem gambling rate. Operators must ensure that they are on track to meet the minimum levels of customer interactions over an annual period, and to do so should assess progress monthly.

The Commission considers that the current problem gambling rates relevant for this provision are the problem gambling rates from the Health Survey for England: Supplementary analysis on gambling (2018), and specifically the problem gambling rates for the individual activities.

We consider this to be appropriate for all licensees, although the survey is based in England. Therefore the rates for each activity are:

  • online gambling on slots, casino or bingo – 8.5 percent of customers
  • online betting with a bookmaker – 3.7 percent of customers
  • other lotteries – 1.3 percent of customers.

We will update the guidance over time where we consider it necessary to reflect recent problem gambling prevalence statistics.

Operators who offer more than one product or activity will need to work out their overall problem gambling rate to check they are compliant with this requirement. This should be based on the proportions of gross gambling yield (GGY) that they generate for each activity. For example, casino games have a higher problem gambling rate. Where a licensee generates more GGY from casino games than from betting, the overall problem gambling rate for this requirement should be proportionate to the GGY from each activity.

Running to a total of 27 pages, the new guidance is almost twice the length of the previous version, first published in July 2019 (which came into formal effect three months later, in October 2019) and the guidance provided is much more detailed and prescriptive than has been the case to date. Importantly, and as the UKGC’s CEO Andrew Rhodes has warned, affected UK licence holders should not wait until 12 September before taking the new guidance into account.

NOTE: For the avoidance of doubt, as matters stand, the existing LCCP Social Responsibility code provision 3.4.1 requirements will continue to apply after 12 September 2022 to UK licensed land-based gambling operators. However, we will be surprised if the Gambling Commission does not indicate in due course that it expects land-based operators to regard the requirements set out in the guidance for remote operators as best practice guidelines for their sector too.