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Consultation response

Summer 2023 consultation – Proposed changes to LCCP and RTS: Consultation Response

This response sets out our position in relation to the consultation on the proposed changes to LCCP and Remote Gambling and Software Technical Standards.

Published
1 May 2024

Last updated
1 May 2024 - Changes

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Contents

Our position: Next steps for a pilot of enhanced financial risk assessments

We are working towards new, proportionate financial risk assessments because we want to prevent the serious cases we have seen where customers were able to spend large amounts in short spaces of time without any checks. We consider that the customer experience can be improved with a frictionless system based on data sharing that helps identify risk for the highest spending customers.

In the 2023 consultation, we proposed a new, frictionless assessment for the highest spending customers once they met set thresholds (defined as net loss in the consultation). The assessment was proposed to cover suitable data to identify risk - looking at risks from credit reference agency data, taking account of current account turnover. Assessments would be able to take account of previous winnings, especially when considering the action that might be proportionate following an assessment. We were particularly targeting 3 key risks:

  • binge gambling
  • significant unaffordable losses over time
  • particularly financially vulnerable customers.

This was not to be a cap on gambling.

But we will not roll out the assessments until we are satisfied that the data-sharing can work well. We are therefore going to run a pilot with the largest operators to test the practical issues before final decisions are made whether we would implement these assessments and the detailed issues.

Consumers will not be affected during the pilot period to make sure that that we can refine the data sharing processes before the assessments would ever be rolled out in a live environment.

The pilot will test out the different forms of data available to credit reference agencies to consider what is helpful and meaningful in the gambling context. For example, while ‘SCOR’ or credit reference data will be the core data that is used to develop solutions, Current Account Turnover (CATO) data will also be considered to understand whether that helps inform a better understanding of financial risk to the customer. CATO would only be used to supplement credit performance data to inform an aggregated assessment of financial risk in relation to that customer. This means that bank account details will not be shared with operators as a result of including CATO data in the pilot.

We have not made final decisions on the financial risk assessments. However, if the pilot progresses well, these would be frictionless checks for the vast majority of customers who undergo them. They would apply to only the highest spending remote gambling accounts and would not be a cap on gambling. They would not affect a customer’s credit score. Once an assessment has been obtained, gambling businesses would be able to consider gambling history such as if the customer is overall winning, and consider whether there are other indicators of harm such as whether the customer has been chasing losses. We have not proposed new requirements on betting at the track, or at the local high street betting shop.

Pilot

The consultation proposal was for enhanced financial risk assessments informed by credit reference data at unusually high loss levels where the risks for consumers are greater, with the assessments to be conducted in a frictionless manner.

The consultation set out that we consider that financial risk assessments would deliver consistent, frictionless processes to assess risk of harm of gambling in the context of the financial circumstances of the highest spending online accounts. Subject to the pilot, we consider that the introduction of financial risk assessments would be a proportionate response to the risks we have seen in our casework. This would improve the quality of operator consideration of risk as the assessments would draw upon the best available data to understand financial risk rather than rely on the current position of direct provision of documentation supplied by customers which may only provide partial insight and which are applied inconsistently across gambling businesses, whilst also improving the customer journey.

A pilot can help us assess the ways in which conducting assessments in a frictionless manner for the first time, for the vast majority of customers who would undergo the assessments, would in the future support a smooth customer journey and avoid seeking documentation from customers where that is not necessary. We can test how the data-sharing would work in practice.

Approach to pilot and data collection period

We understand the interest that this consultation proposal attracted throughout our work on this topic, and we therefore asked in the consultation how these assessments could be introduced in a careful manner if these proposals were adopted.

Many respondents supported the idea of a pilot to further test how the data-sharing works in practice. We agree and have decided that a pilot and data collection period is the appropriate way to proceed in order to further assess how financial risk assessments would be implemented in a live environment. Pilot results and data will inform future financial risk assessment decisions.

Therefore, the Gambling Commission continues to consider the issues raised by consultation respondents in relation to:

  • the appropriate thresholds
  • data to be included in an assessment
  • the validity period of an assessment should a customer meet thresholds once again
  • the processing of data as a result of an assessment
  • the action to be taken while an assessment is taking place.

Our decisions on these issues will be set out in a further response once we have considered the findings from the pilot and data collection period. We will continue to consider the consultation responses we have received in order to help inform these final decisions. The response we provide here focuses on the next steps for the implementation of a pilot, and a separate data collection exercise.

The Social Responsibility (SR) Code Provision which requires participation in the pilot by some operators from 30 August 2024 is set out at the end of this response.

The purpose of a pilot

The pilot will enable us to test the details of data-sharing in practice, working with Equifax, Experian and TransUnion (the main credit reference agencies), and gambling businesses.

It will inform the data which could be included in or excluded from the credit reference agency models. It will help us understand how the data-sharing works in practice such as the speed of the assessment and how it is presented to gambling businesses, as well as the way in which gambling businesses can use the data.

During the pilot, gambling businesses who are required to participate in the pilot will be required to test the data-sharing arrangements. This may be initially with historical customer data, and then current customer data, progressing as directed by the Commission and reporting the outcomes to the Commission.

During the pilot, gambling businesses may not use the data for the purpose of compliance with existing requirements. However, gambling businesses will still be obliged to apply all the existing requirements to empower and protect the consumer. In particular, they will be required to consider other markers of harm to identify and take action to support customers at risk of harm. In addition, we are separately introducing light-touch financial vulnerability checks, which will enable customers at risk of financial vulnerability through for example bankruptcy to be identified. This will be introduced at a higher threshold level of £500 net deposits and remain in place at this level for the duration of the pilot. It will then move to a lower level of £150 net deposits for the light touch check from February 2025.

The purpose of the pilot approach is to understand the level and nature of information sharing between credit reference agencies, and the response from operators. The intention is not to apply thresholds for checks in the same way as though it were a live environment. Indeed, for some of the pilot period, our intention is to allow historical data and/or inactive customer data to be used.

Data to be used during a pilot period

The relevant gambling business will provide customer information to credit reference agencies, who will then produce a financial risk assessment for that customer and share it with the gambling business. Credit reference agencies can use all of the credit reference ‘bureau’ data that they have available in the models in order to provide a total score, risk rating or index rating. Customer specific data points may not be shared with gambling businesses, except those which have been approved for use - these currently are:

  • defaults within a set time period
  • current significant or multiple arrears, and
  • the use of a current debt management plan.

Even in these cases, raw account level data may not be provided to gambling businesses - this means the credit reference agency will summarise the relevant points, minimising the data to be shared with the gambling business. In addition to the ‘bureau’ data, the credit reference agencies can use Current Account Turnover (CATO) data within their models to support an overall assessment of risk, provided in a risk score, risk grade or Red, Amber, Green (RAG) status. No CATO data would be shared directly with a gambling business nor used to develop a derived income value that would be shared with a gambling business. This means that bank account details will not be shared with gambling businesses as a result of including CATO data in the pilot, and the gambling business will not know a customer’s salary.

It is important that we test any data that might be considered for the final financial risk assessments. For this reason, CATO data will be used in the pilot period so that its use and potential weighting within credit reference agency models can be considered during the pilot period.

Participants in a pilot

For the purposes of the pilot, we are requiring operators in the highest 3 relevant bands of operating licence fee categories. This would represent a significant proportion of market share. We assess that a pilot with this group of operators will provide us with sufficient information during the pilot period to inform decision-making. This also avoids placing a burden on smaller operators who may have fewer resources and who may not be easily able to participate in the pilot as effectively or quickly.

We will additionally seek volunteers from operators outside of these fee categories to participate. While we think it is important to offer the opportunity for some smaller or medium operators to contribute to the pilot, we did not consider it proportionate to require these operators to do so. If there are volunteers, we will liaise with any operators who choose to participate in the pilot to ensure that the legal obligation to conduct the pilot activity is put in place as part of the requirements of the specific licence and that the appropriate data protection controls would also apply. This would be in the form of individual licence conditions similar in nature to the general requirement set out here. We may agree different timetables or thresholds for assessments for volunteer participants during the pilot period. Any operator outside of the fee categories set out here interested in volunteering to participate in the pilot should contact the Commission on licensing@gamblingcommission.gov.uk.

Length of the pilot period overall and the progression through the stages

Subject to the pilot findings, the Commission will make final decisions about whether we should proceed to implementation in the live environment and the way in which this would be done, including the thresholds for action, the definitions, the data to be included in an assessment and the processing of data and decision-making, taking into account the consultation responses and our consumer research and other evidence. We will not implement financial risk assessments unless the pilot demonstrates that the process of receiving a financial risk assessment can be frictionless for the vast majority of customers who undergo the assessments, and we remain of the view that conducting the assessments would be for a small proportion of customer accounts.

The pilot period is intended to have 6 months of piloting, and some time for reporting to be completed towards the end of the pilot period. However, we have built some flexibility in the SR Code requiring participation in the pilot, allowing the ability for the Commission to extend the pilot period till the end of April 2025 should this be necessary for practical reasons. The Commission must notify pilot participants by 17 March 2025 if we wish to extend the pilot period to the end of April.

During the pilot period, the Commission will direct and support operators to progress through 3 potential stages of the pilot. This is likely to mean moving initially from testing data sharing in relation to some customer accounts that are not currently active, through to historical data relating to some active customers, to the first occasion that a customer meets a threshold within the pilot period.

We want the pilot to be a practical process for those operators who are required to participate and therefore have set out in the SR Code Provision a great deal of flexibility for the Commission to be able to amend the detailed approach taken by operators during the pilot period, taking into account practical issues raised by gambling businesses and the credit reference agencies.

This means that the Commission can if necessary adapt many of the details of the pilot period such as:

  • specify the start and end date of the stages within the overall pilot and can if necessary vary between operators. For example, this could allow some stages to overlap or happen concurrently
  • specify the thresholds for different stages of the pilot which can, if necessary, vary between operators
  • set thresholds for net deposit levels that would apply in relation to time periods within a stage of the pilot
  • specify the time periods within a stage to which a threshold may apply (this means for example which 90 day periods within a stage are to be considered).

This flexible approach allows adaptation for practical challenges. It can allow learnings to be taken into account as the pilot progresses and allows activity to cease once sufficient information has been considered. This reduces the risk of more pilot financial risk assessments being conducted than is necessary to inform the pilot, and reduces the burden and cost to industry.

Thresholds during the pilot

For the purposes of the pilot, the definition of spend is deposits minus withdrawals (mirroring for now the final financial vulnerability check definition that we have applied following consultation). This definition is one that all operators can consistently use during the pilot period and would enable the pilot to progress at pace. However, the Commission could apply different definitions following the pilot period, if we proceed to implement financial risk assessments in the live environment. The thresholds and definitions of spend or loss would be informed by the separate data collection exercise that we will conduct separately alongside the pilot, as well as the consultation responses.

We intend to set threshold levels to allow for sufficient data to be obtained to provide robust insight but not to overburden operators participating in the pilot. These threshold levels are not indicative of where thresholds would be set following the pilot. We will discuss with and inform participating operators of the threshold levels they must use for the purposes of each stage of the pilot. There is some flexibility in the SR Code Provision to enable some differentiation of thresholds during the pilot should the Commission consider that necessary and appropriate.

Data protection during the pilot period

Consumer respondents expressed some concern that data might be misused by operators for commercial purposes. We have included in the requirement to participate in the pilot a specific prohibition.

The restriction on using the data applies for anything other than what is necessary to participate in the pilot and report findings. This includes a prohibition to prevent operators from using the data for commercial purposes.

Reporting to the Commission during the pilot

During the pilot, the participants must seek a financial risk assessment from a credit reference for any customer who meets the thresholds set by the Commission for the stage. These are described as ‘relevant customers’. The licensee must consider the information they receive from the credit reference agency alongside other indicators of harm and consider what action they would take in the live environment. They must report summaries of their findings in the form and manner specified by the Commission. They must also report to the Commission what these findings would mean for policies and procedures. This is designed to ensure that the Commission receives sufficient information during the pilot to inform future decision making, and that is provided in a consistent format. It also ensures that the Commission provides proformas for operators to complete so that they understand what reporting is required of them.

Data collection period

Alongside this work, a separate programme of data collection by the Commission will inform the final thresholds and definitions of loss or spend for implementation following the pilot period. This is likely to be in the format of regulatory data requests from the Commission to gambling businesses. The Commission will consider the findings of all relevant data requests and collection before making final decisions on whether to proceed to full implementation, and in particular what the thresholds and definitions might be.

Equalities considerations

We are committed to giving consideration to potential equalities impacts, having regard to the need to eliminate discrimination, advance equality of opportunity and foster good relations between those who share a protected characteristic and those who do not. We do not consider that the pilot will have any material impact on the statutory equalities objectives set out in section 149 of the Equality Act 2010.

Evaluation

Along with the Department for Culture, Media and Sport (DCMS) in consideration of Gambling Act Review measures more generally, we need to establish if they are being delivered effectively, understand if they are achieving their intended outcomes and impacts, identify any unintended consequences, and capture learning to inform the implementation of future policy changes. This evaluation process is important, and planning for the evaluations is already well underway. We have set out more information about the approach to evaluation on our website.

A pilot approach is separate to the formal evaluation of the policy which is a distinct and important longer-term process - understanding consumer perspectives and experiences is a vital part of this longer term evaluation.

LCCP Requirement to participate in a pilot period

Social Responsibility Code Provision 3.4.6

Applies to: All remote bingo, casino and betting licences of fee categories J1, K1 and L1.

  1. Subject to paragraph 2 below, in this provision:
    1. the pilot phase is the period from 30 August 2024 to 31 March 2025 inclusive;
    2. the pilot stages of the pilot phase are three stages which operate over such periods of the pilot phase as may be specified by the Commission from time to time;
    3. a threshold is a threshold which is specified by the Commission for the purposes of subparagraph h below from time to time;
    4. a customer’s account is an inactive account for the purposes of a pilot stage if the customer did not use that account for gambling during the period of 12 months prior to the commencement of the relevant pilot stage;
    5. a customer’s account is an active account for the purposes of a pilot stage if the customer used that account for gambling during the period of 12 months prior to the commencement of the relevant pilot stage;
    6. the stage one historical period is such period as the Commission may specify for the purposes of subparagraph h(i) below;
    7. the stage two historical period is such period as the Commission may specify for the purposes of subparagraph h(ii) below;
    8. a relevant customer is:
      1. during the first pilot stage, a customer of the licensee who has an account which is inactive, and in relation to which during the stage one historical period the deposits into that account minus the withdrawals from that account exceeded either the relevant threshold during a calendar day or the relevant threshold over a 90-day period;
      2. during the second pilot stage, a customer of the licensee who has an account which is active, and in relation to which during the stage two historical period the deposits into that account minus the withdrawals from that account exceeded either the relevant threshold during a calendar day or the relevant threshold over a 90-day period;
      3. during the third pilot stage, a customer of the licensee who has an account which is active, and in relation to which:
        • the deposits into that account minus the withdrawals from that account exceed the relevant threshold over any 24-hour period; or
        • the deposits into that account minus the withdrawals from that account exceed the relevant threshold over any 90-day period;
    9. a credit reference agency is any one of the three credit reference agencies, Equifax, Experian and TransUnion;
    10. a financial risk assessment is an assessment provided by a credit reference agency of the financial risk in relation to a customer which takes into account information that the credit reference agency holds about the customer, including (where available) credit performance data and aggregated current account turnover data.

  2. The Commission may:
    1. extend the pilot phase so that it concludes on a date no later than 30 April 2025, any such extension to be notified to licensees no later than 17 March 2025;
    2. for the purposes of paragraph 1b above, specify that pilot stages operate over different periods in respect of different licensees and/or categories of licensees;
    3. for the purposes of paragraph 1c above, specify different thresholds for different pilot stages and/or for different cases and/or categories of case;
    4. for the purposes of paragraph 1f above, specify different stage one historical periods in respect of different licensees and/or categories of licensees;
    5. for the purposes of paragraph 1g above, specify different stage two historical periods in respect of different licensees and/or categories of licensees; and
    6. for the purposes of paragraph 1h above, specify the relevant calendar days and the relevant 90 day periods, and the Commission may specify different such days or periods in respect of different licensees or categories of licensees.

  3. During the pilot phase, a licensee must request from a credit reference agency a financial risk assessment in respect of each relevant customer. The request must be made:
    1. during the first and second pilot stages, within 10 working days of the relevant pilot stage commencing; and
    2. during the third pilot stage, within 24 hours of the time at which the customer first becomes a relevant customer.

  4. In a case in which a licensee receives a financial risk assessment pursuant to a request made under paragraph 3 above, the licensee must:
    1. consider the financial risk assessment and any other relevant information that it holds about the relevant customer and:
      1. assess whether the relevant customer is or was (as the case may be) at risk of harm associated with gambling, and
      2. determine what action, if any, the licensee would take or would have taken (as the case may be) under SR Code Provision 3.4.3 as a result of that assessment if paragraph 6 below did not apply;
    2. record the assessment and the determination referred to in subparagraph a above, and the reasons for the determination; and
    3. provide to the Commission such information in relation to the assessment and/or determination referred to in subparagraph a above, and/or information in relation to such assessments and determinations generally, at such time and in such form and manner as the Commission may specify from time to time.

  5. During the pilot phase, a licensee must:
    1. determine the policies and procedures that it would be appropriate for the licensee to adopt in relation to the provision to and receipt from credit reference agencies of data about customers (including the receipt of financial risk assessments);
    2. determine the policies and procedures that it would be appropriate for the licensee to adopt in relation to assessments of whether a customer is at risk of harm associated with gambling, and determinations of what action (if any) the licensee would take as a result of that assessment, if the licensee were required to obtain and consider a financial risk assessment for the purposes of SR Code Provision 3.4.3; and
    3. report to the Commission its conclusions under subparagraphs a and b above, and its reasons for those conclusions, at such time and in such form and manner as the Commission may specify from time to time.

  6. A licensee must use the financial risk assessment obtained pursuant to a request made under paragraph 3 above, and any information available to the licensee only because it was included in such an assessment, only during the pilot phase and only for the purposes of complying with paragraphs 4 and 5 above. A licensee must not use such a financial risk assessment or such information for any other purpose. In particular, a licensee must not use such a financial risk assessment or such information for the purpose of compliance with its obligations under SR Code Provision 3.4.3.

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