Existing Social Responsibility code provision 3.7.1 will be removed from the Commission’s Licence Conditions and Codes of Practice with effect from 14 April 2020, because licensees will no longer have the option of accepting credit cards from that date.

The Commission expects “a notification period of 3 months to be sufficient for businesses to deliver technical and systemic changes to prevent gambling by credit card”.

Our position

3.14  We will proceed with a ban on the use of credit cards for online gambling. We stated in the consultation that we were persuaded there are risks of harm associated with using credit cards for gambling, and the consultation therefore explored what action should be taken to protect consumers and minimise those risks, rather than whether any action should be taken. We have concluded that gambling with credit cards is not reasonably consistent with the licensing objectives of the Gambling Act, and the consultation produced no compelling evidence to dissuade us from intervention.

3.15  The data gathered from our call for evidence indicates that:

• Credit cards are disproportionately used for gambling by individuals who are experiencing harm (among online gamblers who participated in our tracker survey, 22% of credit card gamblers were problem gamblers, 25% were experiencing moderate levels of harm and 20% lower levels of harm).
• Credit cards are used for online gambling in a manner that could exacerbate harm. Data indicates that individuals are generally making gambling deposits via credit card over several transactions per month, meaning that cash advance fees will exacerbate their total debt. A number of credit card gamblers advised that the cash advance fees do not deter them from using credit cards for gambling, rather that they will chase larger wins to try to recoup the costs of using such cards.
• Credit cards act as a convenient and relatively frictionless form of using borrowed money to fund online gambling.
• The cumulative debt exposure from multiple credit cards can be much more than the user can afford to repay.

3.16 New research undertaken by 2CV during the consultation among 475 credit card gamblers also demonstrates that credit card gambling is disproportionately associated with those who may be at higher risk of harm:

• Half of credit card gamblers have a strong potential to experience harm when gambling.
• Credit card gamblers tend to demonstrate a lower awareness of the risks of gambling; however, they also tend to be highly engaged gamblers for whom credit card use to fund gambling is often embedded and habitual.
• Credit card gamblers with a higher potential to experience harm tend to deposit larger sums for gambling, and make more gambling transactions, via credit cards than those with a lower potential.
• While most credit card gamblers in the research were not fully aware of the costs of using credit cards to fund gambling (ie cash advance fees and often higher interest rates), those with a higher potential to experience harm were less likely to be deterred by such fees.

3.17 Some operators and financial services challenged that a ban on credit cards would not address the underlying causes of harm. We agree that gambling harm is often multi- faceted as it can manifest as various different types of harm for both the individual gambler and his or her family and can manifest alongside other harms not directly related to gambling such as financial hardship caused by other circumstances. A ban on credit card gambling does not seek to address those wider complexities.

3.18  However, we expect it to be a measure that will reduce the risks of harm to many consumers by preventing them from gambling more than they can afford to repay; or at the very least, it will add levels of friction to the process of gambling with borrowed money such that the rate of financial loss is slowed down and harm is potentially curtailed. Consultation feedback demonstrates that it is not only credit card gamblers who are exposed to these risks but their family members also.

3.19  We are not persuaded that the loss of ‘credit card use’ as a variable in operators’ risk detection algorithms is an adequate reason to continue to permit credit cards for online gambling. That is, given the strong association between credit card gambling and harm, it would not be appropriate to continue to permit credit cards simply to enable operators to monitor their use as a basis for possible customer interaction. We note in any case that operators have not typically included ‘credit card use’ as part of their harm prevention models, rather they have tended to use the ‘number of payment methods’ on the customer account as a marker of harm.

The potential impact on those not currently experiencing harm

3.20  The data gathered from our call for evidence, and the new research described above, is clear that not all credit card gamblers are currently experiencing harm. We know that around half of all individuals who used a UK-issued credit card for gambling in 2018 used them in only one month of the year; a third of engaged online gamblers are not currently experiencing harm, and the new 2CV research shows that half of credit card gamblers have a high or medium ‘gambling literacy’ score indicating a reasonable understanding of how gambling works.

3.21  However, we expect a reduction in harm resulting from a prohibition on credit card gambling will outweigh any negative impact on those not currently experiencing harm. The Commission will be working with research agencies to evaluate the impact of the ban on gamblers, and we acquired data during the consultation about consumers’ motivations for using credit cards for gambling which will be used to inform the evaluation.

3.22  That data showed that most who use credit cards for gambling (ie use them instead of debit cards or other means) do so either for the added payment security afforded by credit cards; in order to accrue rewards offered by the card issuer; or simply because they do most of their spending on credit cards and they do not treat gambling any differently. However, it also showed that:

• while 82% of credit card gamblers were not fully aware of the fees and interest accrued through credit card gambling transactions,
• three-quarters of all lower risk credit card gamblers are likely to be deterred from using their credit cards for gambling having now been made aware of the charges they might incur.

3.23  This indicates that the accrual of fees and potentially higher interest rates for gambling (ie cash advance) transactions may be of a greater inconvenience to the cohort of lower risk credit card gamblers than a ban on credit card gambling itself.

3.24  42% of lower risk credit card gamblers said they would use their debit cards instead in the event of a ban; 41% said they would stop gambling. It might be expected that many lower risk gamblers would modify their gambling spend behaviour anyway (ie move to debit cards or cease gambling) having been made aware of credit card charges.

3.25  The data exploring the motivations for using credit cards for gambling is summarised in greater detail later in this document.

Risk of consumers substituting to other high cost forms of borrowing such as payday loans

3.26  Our consultation noted that, compared with those who are not currently experiencing harm from their gambling, consumers who are experiencing some level of harm make proportionately greater use of overdrafts and loans to fund online gambling. This supported the concern raised by many respondents to both the call for evidence and the consultation that some consumers may use other forms of borrowing to fund their gambling – and therefore continue to suffer harm – if they could not use credit cards.

3.27  New 2CV research indicates that 8% of higher-risk credit card gamblers would consider using payday or unsecured loans to fund their gambling instead; 15% said they would consider credit card money transfers, 8% an overdraft. However, 50% of higher-risk credit card gamblers indicated that they would either stop gambling or would otherwise use their own available funds if they could not use credit cards to gamble.

3.28  We expect a reduction in harm resulting from a prohibition on credit cards to outweigh any harm from a minority of customers substituting to payday loans or other forms of borrowing. It will however be important for gambling operators and financial services to continue to make progress in identifying consumers at risk of harm from using borrowed money other than credit cards to fund gambling, and to mitigate those risks; and more generally, to address the risks of harm from unaffordable gambling whether or not the gambling is funded by commercial borrowing.

3.29  The data shows that most online gambling is conducted on debit cards and some consumers are already using other forms of borrowing to fund their gambling. Therefore, and notwithstanding an intervention on credit cards and the risks of consumers substituting to other forms of borrowing, there is already a need for operators to accelerate work on affordability and for banks to make progress in identifying gambling vulnerabilities and preventing harm (given that banks have direct visibility of current account transactions and other forms of commercial borrowing to fund gambling).

3.30  The action we are taking on credit cards must therefore form part of a wider challenge to reduce harms from unaffordable gambling, requiring a holistic approach that many debt relief charities and indeed financial service providers advocated in their consultation responses.

3.31  There is a large body of work already underway, or due to commence in 2020, concerning the role that both operators and financial services can play to reduce the risks of gambling harm to vulnerable consumers:

• The Money and Mental Health Policy Institute recently announced a programme of work being undertaken during 2020/21 which will engage financial services in tackling gambling-related harm, bringing banks and lenders together to highlight the latest evidence and share best practice.
• That programme of work, which is funded by a regulatory settlement approved by the Gambling Commission, will complement the University of Bristol/Gamble Aware three-year strategic partnership looking to explore the role financial services can play in reducing gambling harms.
• The Behavioural Insights Team is currently working with some financial services to understand how transactional data analysis can help to identify gambling harms.

3.32  As part of the National Strategy to reduce gambling harms we will continue to collaborate with key partners across the gambling, financial, charitable and regulatory sectors to support developments that can help vulnerable customers who may be at risk of harm from gambling. The evaluation of the impact of our regulatory change on credit cards will try to assess the extent to which a reduction in harm is offset by consumers experiencing harm from substituting to other forms of borrowing, alongside an assessment of the impact of a ban on consumers not currently experiencing harm from credit card gambling. Our evaluation approach and proposed framework is outlined in more detail in section 6.

The role of operators in affordable gambling

3.33  Gambling operators should continue to work with financial services to understand what measures can be used to better identify customers who may be gambling beyond their means. We also recently strengthened the customer interaction elements of our LCCP which now includes a requirement to take account of our guidance to remote operators and guidance to premises-based operators.

3.34  We are clear in that guidance that remote operators should have regard to a range of harm indicators including a customer’s account-level payment behaviour which could indicate they are struggling to fund their gambling (e.g. failed deposits, or the use of multiple payment methods such as debit cards, pre-paid cards and e-wallets to fund an account, may suggest that the customer’s gambling is not consistent with what they can afford to spend). We expect both remote and non-remote operators, as part of their customer interaction and ‘know your customer’ procedures, to consider factors that might indicate that a customer is spending more money on gambling than they can afford.

3.35  In meeting our requirements on customer interaction, we would expect operators to take particular account of customers who, for example, are (or appear to be) borrowing money for the purpose of gambling, or who are only able to fund their gambling with borrowed money. If necessary, we will augment our customer interaction guidance with specific reference to the use of borrowed funds. The use of credit is however only one indicator that gambling may be unaffordable. Customers can experience harms from gambling beyond their means without having recourse to borrowing.

The Commission has confirmed that “pre-paid cards will not form part of the scope of the ban on gambling with credit cards, insofar as the ban will not extend to pre-paid cards as a payment instrument distinct from credit and debit cards” even though “a pre-paid card could in some circumstances be loaded via funds obtained from a credit card”.

It has also confirmed that it does “not expect a ban to prevent the use of credit cards for gambling by wholly indirect means – for example …. individuals intent on obtaining gambling funds from their credit cards could use those cards to withdraw money from a cashpoint. They might also try to load funds onto a pre-paid card via a credit card transfer or indeed through money withdrawn from a cashpoint via credit card. However, it is important to note that such methods involve much greater levels of friction in the gambling transaction journey than simply using a credit card through either the gambling operator’s website or through an e-wallet that the operator makes available through their payment gateway”.

In relation to the role of financial services in reducing harms from gambling with borrowed money, the Gambling Commission states its position as follows:

Our position

4.11  As explained above, most online gambling is conducted on debit cards and many consumers use forms of borrowing other than credit cards to fund their gambling. Our action on credit cards must therefore form part of a wider approach to prevent harms from unaffordable gambling. This means, for example, that gambling operators and financial services should continue to make progress on preventing harm to consumers who use other forms of borrowing to fund their gambling. However, the use of credit is only one indicator that gambling may be unaffordable – a customer can experience harm by gambling beyond their means without any recourse to borrowing. Operators and financial services should therefore also take account of a customer’s gamblingspend in the context of their overall income and expenditure.

4.12  As part of the National Strategy we will continue to collaborate with key partners across the gambling, financial, charitable and regulatory sectors to support developments that can help vulnerable customers who may be at risk of harm from gambling. There is a large body of work already underway, or due to commence in 2020, concerning the role that both operators and financial services can play to reduce the risks of gambling harm to vulnerable consumers:

• The Money and Mental Health Policy Institute recently announced a programme of work being undertaken during 2020/21 which will engage financial services in tackling gambling-related harm, bringing banks and lenders together to highlight the latest evidence and share best practice.
• That programme of work, which is funded by a regulatory settlement approved by the Gambling Commission, will complement the University of Bristol/Gamble Aware three- year strategic partnership looking to explore the role financial services can play in reducing gambling harms.
• The Behavioural Insights Team is currently working with some financial services to understand how transactional data analysis can help to identify gambling harms.

4.13 The suggestions made by consultation respondents and summarised above could be extremely helpful measures to identify and reduce the risks of harms from unaffordable gambling. The suggestions are not mutually exclusive, and several combinations of these ideas could be explored. Financial services should consider these measures as the programmes of work under the National Strategy move forward.

In an announcement on the Commission’s website (that can also be downloaded below), Neil McArthur, its chief executive, says:

Credit card gambling can lead to significant financial harm. The ban that we have announced today should minimise the risks of harm to consumers from gambling with money they do not have. Research shows that 22% of online gamblers using credit cards are problem gamblers, with even more suffering some form of gambling harm. We also know that there are examples of consumers who have accumulated tens of thousands of pounds of debt through gambling because of credit card availability. There is also evidence that the fees charged by credit cards can exacerbate the situation because the consumer can try to chase losses to a greater extent.

We realise that this change will inconvenience those consumers who use credit cards responsibly but we are satisfied that reducing the risk of harm to other consumers means that action must be taken. But we will evaluate the ban and watch closely for any unintended circumstances for consumers.

The ban is part of our ongoing work to reduce gambling harm. We also need to continue the work we have been doing with gambling operators and the finance industry to ensure consumers only gamble with money they can afford to spend.

In the same announcement, Culture Minister Helen Whately is quoted as saying:

Whilst millions gamble responsibly, I have also met people whose lives have been turned upside down by gambling addiction. There is clear evidence of harm from consumers betting with money they do not have, so it is absolutely right that we act decisively to protect them.

In the past year we have introduced a wave of tougher measures, including cutting the maximum stake on fixed odds betting terminals, bringing in tighter age and identity checks for online gambling and expanding national specialist support through the NHS Long Term Plan. We have also secured a series of commitments from five leading gambling operators that will include £100 million funding towards treatment for problem gamblers.

But there is more to do. We will be carrying out a review of the Gambling Act to ensure it is fit for the digital age and we will be launching a new nationwide addiction strategy in 2020. We will not hesitate to take any further action necessary to protect people from gambling harm.

Insofar as lotteries are concerned, the Gambling Commission states as follows in its “Notes to Editors” in today’s announcement:

• the ban will not extend to non-remote lotteries (where payment is made face-to face);
• we acknowledge that National Lottery and society lottery tickets and scratchcards can be bought in supermarkets and newsagents along with other products;
• it would be a disproportionate burden on retailers to identify and prevent credit card payments for lottery tickets if they form part of a wider shop;
• National Lottery retailers are trained in preventing excessive play and National Lottery draw-based games have the lowest problem gambling rate of any product at 1%;
• the National Lottery already does not accept credit card payments for online play;
• some other gambling operators have already put in [place] voluntary measures to prevent credit card transactions.

NOTE: Albeit slightly overshadowed by its credit card ban announcement, the Gambling Commission has also announced this morning (14 January 2020) that, by no later than 31 March 2020, all UK licensed online gambling operators must participate in the multi-operator self-exclusion scheme GAMSTOP.

UPDATES:

1. On 29 January 2020, the Gambling Commission published Guidance for society lotteries and ELMs on the credit card ban and GAMSTOP, the content of which will also be of interest to remote gambling operators in other sectors who receive recurring subscription payments by credit card from customers.

2. You can read here the Commission’s warning contained within its “Protecting the safety of consumers is at the heart of today’s credit card gambling ban” website posting, published on 14 April 2020, the same day that the credit card ban came into force.

3. On 10 June 2020, as reported by us here, the Commission reminded operators that “they must take the following course of action before accepting customer payments via any MSB [Money Service Business] (including through any card payment instruments issued by those MSBs to its customers):

• • operators must satisfy themselves that customers of that MSB cannot fund their e-accounts or e-wallets with credit card deposits and then use those funds for gambling.  
  • operators will need to reject all payments made through such MSBs that have not developed a ‘block’ to prevent credit card deposits being used for gambling through their e-account or e-wallet facilities.

In issuing this reminder the Commission referred to “electronic money institutions such as Revolut which has confirmed that its customers can add money using credit cards. Operators must therefore put systems in place to prevent gambling payments from these products”, adding “it is important to note there may be other e-money businesses which operate a similar service to Revolut and which also allow their customers to make credit card deposits which then could be used for gambling”.