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Consultation response

Changes to LCCP on ADR, CI and RET contributions

A summary of the responses to our consultations on changes to LCCP requirements for customer interaction and alternative dispute resolution (ADR) providers.

Alternative dispute resolution

Consultation proposal:

Requiring gambling businesses to only work with ADR providers who meet our additional standards

All gambling businesses licensed by us must appoint an alternative dispute resolution (ADR) provider if customers gamble directly with them. If a customer has a complaint about the outcome of their gambling, they must complain first to the gambling business and go through its complaints process. If the customer is unhappy with the business’s decision, they can ask the ADR provider to look at their complaint.

We consulted on whether we should require licensees to use only ADR providers who meet our additional standards, as well as the requirements of the ADR Regulations. We considered that this would give an incentive to providers to meet our additional standards, because those that did not meet them could not be used by gambling businesses. It would also make sure that consumers received a consistent service from any ADR provider in the sector.

Separately, we published a supplementary consultation inviting comment specifically on the additional standards for ADR providers.

Summary of responses – LCCP consultation

Consultation question 1:

Do you agree that we should require gambling businesses to only use ADR providers that have met our additional standards?

We received a total of 48 responses to this consultation from the following categories:

  • Licensed operators – 14
  • Consumers – 14
  • Others (including trade associations and ADR providers) - 20

A large majority of respondents – 46 out of 48 – supported this proposal. Those in favour of the change generally considered that having standards in place, and the requirement to follow them, meant that consumers would benefit from a more consistent and reliable service from ADR providers.

Two respondents did not support the proposals. One, a consumer, did not give any reasons. The other, a licensee, thought that licensees would be at risk of breaching a social responsibility code provision if its chosen ADR provider failed to meet the additional standards. The respondent expressed concern that we would be imposing additional legal duties on licensees that could be breached by a third party (the ADR provider). This respondent, and a respondent in favour of the change, noted that the ADR standards (published in October 2018) had not been subject to a formal consultation.

One respondent that supported the change had concerns that enforcing the ADR standards via licence conditions on operators could be “seen as significant regulatory creep”.

Two respondents commented on the approach we have taken to raise standards. One thought that if there were providers not meeting the standards we should address that with those providers first, rather than “moving to a new set of additional standards … through the LCCP”. Another suggested that providers would already be strongly incentivised to meet the requirements in the regulations because the consequence of failing to do so would be losing all business relating to licensed gambling operators. The respondents queried whether we had considered voluntary standards and systems as a way of driving improvements.

One licensee was in favour of the change but raised several points in its response:

  • it would be valuable for us to provide information on the ADR providers that would be impacted by these changes, and how many were expected to meet the new standards.
  • providers with our ‘extra’ approval could increase prices, and we could consider benchmarking prices to deter providers from making unreasonable increases
  • what the procedure would be if an ADR provider did not to meet the required standards
  • measures in place to make sure disputes are reviewed by the provider within a fair timeframe
  • how licensees could challenge a provider’s “inconsistent” decisions.

The ADR standards set out some general principles around the award of compensation. One respondent thought that the industry could be “opening itself up to a compensation culture type environment that has been seen in other industries”. Another was concerned about the impact of allowing ADR providers to award compensation at their own discretion. It asked how we would ensure consistency when providers awarded compensation, and how we would determine whether the provider had recognised considerable impact on the customer and calculated the appropriate amount.

Summary of responses – supplementary consultation

Supplementary consultation question 1:

Please provide any views you have on our additional standards for ADR providers.

There were ten responses to the supplementary consultation, seven of these were from licensees. The consultation question specifically asked for views on the additional ADR standards, rather than whether respondents were in favour of the wider proposal to require licensees to only use ADR providers that meet them. Four responses (two from operators and two from others) gave unequivocal support, saying they were “logical and proportionate” and “clear (and) concise”.

The remaining responses provided a variety of observations, principally on how the regulations and additional standards would be applied, rather than on the standards themselves. These covered a variety of aspects including:

  • Definitions of disputes within an ADR provider’s remit (rather than being a regulatory matter)
  • Handling disputes where a consumer has self-excluded using Gamstop
  • Disputes where there are concerns around money laundering or fraud.

Five responses (four from operators, one from a trade association) commented on an aspect that is covered by one of the additional standards – compensation. One respondent was supportive of the principles we have set out on compensation, agreed it would be exceptional rather than typical, but suggested we should reconsider our position regarding the right to appeal the amount awarded. The others raised concerns around how it might be awarded consistently across ADR providers and suggested a need for more and clearer guidance on the scope and scale of compensation.

Our position

We have carefully considered the responses for both consultations and will make the change to social responsibility code 6.1.1 as originally proposed. This will require licensees to use only ADR providers that we have judged to meet our ‘additional standards’. A list of those providers will be published on our website.

The only direct powers we have to regulate ADR providers are those provided by the ADR Regulations. Our review of consumer complaints found that the regulations were not specific enough to drive the improvements we judged were necessary in the gambling sector. The only way we can make sure providers follow our additional standards is to require licensees to work only with providers that meet those standards. One of the goals of introducing the standards is to make sure that consumers receive a consistent level of service from providers. We do not think we could achieve this if the standards were voluntary.

We do not agree that these measures constitute “regulatory creep”. Some of the responses suggest there is a misunderstanding about how the new requirement would work in practice. We are not imposing additional legal duties on licensees that could be breached by a third party (the ADR provider). Licensees are not required to meet the standards. Neither are they required to check or make any judgement about whether their provider is meeting the standards in their day-to-day dealings with them. The only new requirement on licensees is that they must check their provider is on the list of those we have approved. This is very similar to, and builds on, the existing requirement on licensees in the LCCP to name an ADR provider whose name is on our published list of those approved under the Regulations.

All ADR providers will be impacted to some degree by these new standards. We worked with providers to develop them and make sure they are practically achievable. We do not think it is appropriate to share information about the impact on specific providers because that information is not relevant to licensees or other stakeholders.

It would not be appropriate for us to judge what an appropriate price would be for an ADR service; this is a commercial decision for the providers.

If an ADR provider has its ‘additional approval’ (or approval under the Regulations) removed we would deal with these situations on a case-by-case basis, but the process followed would be the same. We would agree a notice period with the provider to make sure it could complete or hand over any active disputes and give licensees time to identify a new provider. The notice period would vary depending on the number and complexity of outstanding disputes, and on the nature or seriousness of the reason for losing approval.

The timescales for providers to deal with disputes are set out in our standards and the ADR regulations. It is for the providers to decide how they manage and prioritise their work in order to meet those standards.

The ability for consumers and licensees to complain about ADR providers will remain the same as it is now. Ultimately, if licensees think that a provider’s decisions are inconsistent, they can choose to use another one, challenge the provider, or tell us so we can act.

The ADR Regulations do not prevent providers from awarding compensation. Our guidance makes it clear that we expect the award of compensation to be “exceptional rather than typical”, and that “in most cases providers will not award compensation.” The aim is to promote consistency rather than make compensation awards more frequent. We have not ‘introduced’ compensation, but instead tried to standardise the way it might be applied. ADR providers are independent third parties, therefore it would not be appropriate for us to determine whether the level of compensation awarded is appropriate, or whether it is awarded at all.

The ADR guidance document includes three elements. It indicates the requirements of the ADR regulations, sets out our ‘additional standards’ and provides general guidance and information on how we expect both the ADR Regulations and new standards to be applied in the sector. The responses to the supplementary consultation provide helpful views on areas where the ADR guidance document may be reviewed and updated in future. Where respondents did make comments or identify concerns on specific aspects, the majority of these were on how the additional standards (and regulations) would be applied and not on the standards themselves. Looking at all the responses received, we do not consider that any of them identify any errors or significant flaws in the additional standards.

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ADR-CI-RET response: Summary of consultation responses: Customer interaction
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