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Guidance

Guidance to licensing authorities

The Gambling Commission's guidance for licensing authorities.

Published
1 April 2021

Last updated
18 October 2024 - Changes

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

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.

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.

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.

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).

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.

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:

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 goes into more detail on this.

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