UK lenders accused of exacerbating problem gambling issue
Financial institutions in the UK are lending an astounding £174 million per week to individuals who spend excessively on gambling. Abound, a credit technology firm, has conducted a study using open banking data from their own loan applications. Their findings reveal a concerning trend that could have unintended consequences for the gambling industry.
StepChange, a leading debt charity, analyzed Abound’s findings using advanced artificial intelligence technology. They suggest that lenders may unknowingly be fueling gambling problems by extending credit to individuals who spend significant amounts on betting activities, both online and at bookmakers.
Abound takes a responsible approach by rejecting loan applications from individuals who deposit more than 30 percent of their income into gambling accounts. As a result, almost 29 percent of their loan applications have been declined. However, traditional credit checks do not address the identification of these gambling risks, which is a flaw in the current system.
In addition to this, Abound has been lending to an average of 550 people per week, while rejecting around 230 due to their gambling spending. Surprisingly, out of these rejected applications, at least 15 percent have managed to obtain loans elsewhere.
Peter Tutton, the head of policy at StepChange, acknowledges that lenders are not acting unlawfully. However, the tools they use, such as credit ratings, are outdated and unable to identify financially vulnerable borrowers in the modern online era.
Based on Abound’s findings, it has been estimated that nearly £174 million per month is being loaned to individuals who would not have passed Abound’s checks. This alarming figure is based on the fact that lenders in the UK extend a staggering £600 million of credit per week.
Despite the government’s plans to revise affordability checks in an effort to strengthen regulations, progress has been significantly delayed. These checks would assess whether gamblers are spending beyond their means, focusing on losses incurred rather than account deposits, which can be offset by winnings. It is anticipated that only 3 percent of individuals in the market would be affected by these proposed measures.
However, the impact on civil liberties due to these checks has raised concerns among pro-gambling campaigns and lobbyists. They argue that the enjoyment of gambling activities should not be disrupted to solely accommodate those with gambling problems.
It is worth noting that while betting with a credit card has been banned, other forms of loan acquisition for gambling have strangely remained unaffected.