Chairman’s Blog: the Growing Role of FOS in Redress Policy for Gambling Consumers

22 November 2024, by Andrew Fraser, IBAS Chairman

Protection Against Harmful Gambling

As the current law regulating gambling nears its 20^th birthday it’s worth reflecting on what has been provided to consumers by way of protections from harmful gambling. This article considers the means by which consumers can seek redress about the problems they have faced with their gambling.

Up until the Gambling Act 2005, bets were unenforceable at law and so no legal action could be taken to receive expected winnings. The Gambling Act changed this, but it seems the Budd Review, which preceded the Act, saw no reason to go any further and include adjudication of gambling disputes within the provisions of the Act.

It’s surprising that the Budd Review wasn’t influenced by the creation of the Financial Ombudsman Service (FOS) which was taking place at the same time. FOS showed that Parliament was committed to legislating for the provision of alternative dispute resolution, not least because of the hurdles faced by many consumers in accessing court actions.

25 Years of Dispute Resolution – But Not on Every Subject

The Independent Betting Adjudication Service (IBAS) has successfully provided outcomes to gambling disputes for over 25 years. However, without a legislative footing it depends on the agreement of the parties to do its work, and this is a competitive environment with other adjudicators often with links to the gambling industry.

Gambling adjudicators are restricted to considering disputes concerning the gambling ‘contract’. IBAS has never been permitted to consider complaints about the harmful effects of gambling, though it receives many complaints on this theme. IBAS can only forward these to the Gambling Commission which may consider the issues raised from a regulatory perspective, but not in terms of complaint resolution.

Government’s Gambling Review and Recommendations

The White Paper on the reform of gambling from the last Government set out for the first time, plans for complaints that fall under a heading of ‘social responsibility’. It stated that these could be considered by an industry-created ombudsman, rather than a body created through statute. Government’s progress towards this has been slower than the White Paper envisaged. As well as bucking the trend for the creation of ombudsmen in other sectors of the economy, it raises questions as to why there is apparently more need for a rail ombudsman than a gambling ombudsman.

Growing Role of the Financial Ombudsman Service

More anomalous perhaps is the position of FOS in relation to disputes concerning harmful gambling. Because UK banks and financial institutions are regulated and must refer their consumers to FOS when they have an unresolved dispute, FOS is the only body considering these disputes. The anomaly is that these disputes are generally more relevant to the gambling businesses used by the consumers, but regulatory restrictions mean they can’t complain to them.

There has been a growing number of complaints referred to FOS from consumers concerning their losses from gambling. Typically these will include that their bank or lender should have noticed their spending and exercised a duty of care to intervene to help them with their gambling addiction. This might mean that the bank should have puts tools in place to prevent transactions or not offered credit that would only be used for gambling.

Consumers complaints to FOS typically request that their bank recompense them for their gambling losses, saying that had the bank intervened they would have stopped gambling. In response, banks generally say that the consumer authorised the gambling transactions, that gambling is a legitimate activity, and the transactions weren’t considered to be fraudulent, and for these reasons it is their responsibility to carry out customers’ payment instructions.

Banks do not routinely monitor their customers’ accounts for gambling activity, whereas gambling operators clearly do. Banks have tools that allow customers to restrict their gambling but can’t prevent all gambling transactions, particularly those conducted via crypto currency payments. There’s no protection against harmful gambling that the banks can offer that comes close to self-exclusion and the limitation or closure of accounts by gambling operators.

Differing Responsibilities of Banks and Gambling Operators

In response to the White Paper, the Gambling Commission is increasing the requirements on gambling operators to check that gambling is affordable and ensure that other signs of a problem are acted upon. In contrast the banks will generally only intervene with customers where there are signs of fraud, or financial difficultly. The difference between the banks and the gambling operators is that the former need their customers to alert them to their problem gambling, which tends to take place when substantial losses have been incurred, whereas the latter will have to be proactive about identifying vulnerabilities.

The lack of provision for complaints about harmful gambling means that FOS is taking an increasingly prominent role in their determination when it is clearly not the right vehicle for this work. A recently published FOS decision has a bank customer saying that responsibility can’t just be on the customer to disclose circumstances to the bank, and the bank saying that it cannot act unless it is made aware of a problem. Banks and other regulated financial businesses are required to support vulnerable customers under the recently introduced Consumer Duty, but this is unlikely to offer more protection to those addicted to gambling.

Unless the situation for complaints about harmful gambling changes customers will be left without proper recourse. Sympathy for banks is often in short supply, but it seems unfair that they are forced to act as proxy for the gambling operators in these disputes.

Recent Developments in the News

It was interesting to see the Money and Mental Health Institute host an event earlier this month promoting the role that banks can play in reducing gambling harms. This position was endorsed by the Gambling Commission who spoke at the launch of the Institute’s report on the subject. Somewhat surprisingly, coverage of the event noted the growing role of FOS in considering complaints about irresponsible lending without any obvious reference to the importance of developing redress options within the gambling industry itself.

The lack of easy to access, low-cost redress was further highlighted by a High Court judgement published just over a week ago, concerning a claim that a betting operator had failed in its duty of care to prevent a customer gambling in a way that the claimant argued was clearly unaffordable to him. Court action might always be an option to consumers, but it is disappointing for it to remain for so long the first port of call for anyone seeking redress on claims of this nature.

A Better Approach to Policy Development?

Had the Government acted to create a gambling social responsibility ombudsman earlier, by statute, or via the route proposed in the White Paper, then it seems likely that the banks and FOS would have been relieved of many complaints concerning harmful gambling, and the complaints could have received the proper, targeted consideration that they deserve. The absence of an ombudsman is likely to mean that policy towards harmful gambling will be developed by FOS rather than a professional gambling ombudsman.