Raising Standards for consumers - Compliance and Enforcement report 2019 to 2020
2 - Triggers and customer affordability
Customer protection has continued to be a priority for the Commission and consideration of affordability should be a signiﬁcant driving factor in customer risk assessments.
Considering affordability is of signiﬁcant importance to protecting consumers we are consulting on introducing new requirements as part of a strengthened approach to customer interaction. Operators should learn the lessons contained in this report as well as preparing for any new requirements that may emerge from our consultation. Twelve months ago, we recommended that operators reassess their framework on triggers to consider their customer base and individual customer’s disposable income levels as a starting point for setting benchmark triggers.
The intention behind this was to ensure vulnerable customers were identiﬁed as early as possible and interacted with appropriately. Despite this recommendation, the compliance and enforcement teams have continued to review cases where, in the last twelve months, individuals have demonstrated gambling-related harm indicators and still been able to continue to gamble without effective engagement.
Furthermore, these individuals have funded their gambling without satisfactory affordability checks and appropriate evidence being obtained. Casework and compliance assessments which resulted in action being taken by the Commission, have shown:
- An online operator permitting a customer to deposit, and lose, £187,000 in two days. This was despite the customer having no regular source of income and funding play from inheritance money or redeposited winnings.
- An operator not conducting checks to establish a customer’s source of funds as they had not yet hit any triggers.
- A land-based casino customer who lost £18,000 in one year despite having told staff her savings had been spent and that was she was reliant on borrowing funds from family and her overdraft facility to fund her gambling.
- A retired land-based casino customer being able to lose £15,000 in 44 days which they could not afford.
Open source data that can help operators assess affordability for GB customers and improve its risk assessment and customer interventions has not notably changed since last year’s enforcement report (opens in a new tab).
According to the office for National Statistics Annual Survey of Hours and Earnings:
- Median gross weekly earnings for full-time employees in the UK has increased 6.4% to £585 from £550 (2019 provisional and 2018 revised results and 2017 provisional and 2016 ﬁnalised)
- The occupation group with the highest median weekly earnings for full time employees is still managers, directors and senior officials for which median gross weekly earnings has increased 4.6% to £862 from £824 (2019 provisional and 2018 revised results and 2017 provisional and 2016 ﬁnalised).
Based on the above, 50% of the full-time employees in the UK receive less than £30,500 gross earning per year and 50% of the full-time managers, directors and senior officials in the UK receive less than £45,000 gross earnings. These earnings are what is received before expenses such as income tax, national insurance, mortgage/rent payments, telephony contracts, travel costs, food and utilities are paid for. We would expect such expenses to be considered in affordability frameworks so the starting point adequately reﬂects the true level of available disposable income for that individual.
Open source information is an important element of an affordability framework because it is a parameter to consider when setting benchmark triggers that will drive early engagement with customers. Officials are aware of affordability frameworks being considered by operators, but they are not being implemented at pace despite our guidance and advice.
We are concerned licensees are creating complex and convoluted matrices and mappings within their affordability framework to place customers into trigger groups well over the gross earnings stated above, before disposable income is factored in. Of more concern, these trigger groups are set without any sort of customer interaction to inﬂuence their true affordability determination. Operators must interact with customers early on to set adequate, informed affordability triggers to protect customers from gambling related harm. Failure to do so could render the operator non-compliant.
Customers wishing to spend more than the national average should be asked to provide information to support a higher affordability trigger such as three months’ payslips, P60s, tax returns or bank statements which will both inform the affordability level the customer may believe appropriate with objective evidence whilst enabling the licensee to have better insight into the source of those funds and whether they are legitimate or not.
We appreciate that operators have established customer bases and these customers will either be in a loss position or a proﬁt position with the operator. For customers in the loss position a sensible approach would be to assign the customers a national average affordability trigger, irrespective of historical deposits and withdrawals, and move these customers to higher affordability triggers once appropriate affordability evidence is received.
For customers in a proﬁt position, operators may have adopted a framework which allows triggers to be moved up from the national average without affordability evidence as their winnings are evidence of what these customers can afford. With this type of customer, we would expect an operator to still be considering affordability whilst also monitoring the customers play activities to be satisﬁed that they are not exhibiting signs of gambling-related harm. This especially applies to large one-off winners such as jackpot winners.
If winning customers are not being asked for affordability evidence but are withdrawing and redepositing funds, we consider checks are required to mitigate any Social Responsibility or Money Laundering risks as customers could be misappropriating funds and re-depositing fresh criminal spend the operator mistakenly believes are previous winnings.
Operators need to consider this and obtain evidence when appropriate to satisfy themselves that this is not the case.
At the time of writing this report, the long term ﬁnancial impact of the COVID-19 crisis is yet to be fully understood, although initial data analysis (opens in a new tab) published by the Commission indicated that 40% of people saw a decrease in their disposable income. This was occurring whilst 20% of the population reported a decrease to their mental health and during lockdown may have sought additional forms of entertainment, or to replace betting activity no longer available such as on live sports.
In response to evidence showing some gamblers maybe at greater risk of harm during lockdown, the Commission published new guidance for online operators to help reduce the risk of harm in these unprecedented circumstances. The guidance clearly sets out that we expect operators to:
- Urgently review their thresholds and triggers to reﬂect the change in circumstances, adopting a precautionary approach.
- Keep under review duration of play for customers which can be an indicator of harm and keep this under review to identify changes which warrant intervention.
- Conduct effective affordability checks during the life of the customer relationship but particularly during this crisis.
- Prevent reverse withdrawals which has been linked to problem gambling behaviors and harm.
- Restrict bonus offers to those displaying indicators of harm.
The Commission recommended operators urgently, given the impact of COVID-19, revisit their framework on triggers and consider their customer base and their disposable income levels as a starting point for benchmark and affordability triggers, building upwards, to ensure vulnerable customers are identiﬁed as early as possible and interacted with appropriately. Knowing and identifying customers at risk of or experiencing harm and acting early and quickly could help stop or prevent any harm worsening. The Commission continues to monitor the impact of COVID-19.Previous section
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Customer Interaction and Social Responsibility failings