The Government’s long-awaited policy paper on gambling reform (the “White Paper”) has sparked a significant discussion in its proposal to establish an ombudsman to provide a more robust and effective system for adjudicating gambling customer complaints relating to social responsibility and gambling harm (the “Ombudsman”). The proposal is well intentioned, with the laudable aim of better protecting consumers and enhancing the industry’s accountability, but can it really work in practice? In this article, we’ll consider the possible ‘thorny issues’ facing the creation of such a body, as well as its envisaged structure and functions, the possible implications for operators, and the timeline for its implementation.

Why does the Government think it’s required?

Under the Gambling Act 2005 (the “Act”), the Gambling Commission (the “Commission”) can investigate individual complaints, including those relating to social responsibility and gambling harm, but it does not have the power to adjudicate those complaints, nor to require operators to provide redress to affected consumers. It can also commence a review of the operator’s licence under the Act, but it has no powers during that review process to compel the operator to return any funds to the customer (although, it is commonplace for operators to propose divestment of funds as part of a regulatory settlement, and in reality is expected of operators if they want to reach a regulatory settlement rather than risk a fine). In any event, a licence review is generally seen as a draconian measure, which is expensive and time consuming for both the operator and its already overstretched regulator.

Although operators are required to have an appropriate complaints procedure in place and a way to refer disputes to an alternative dispute resolution (“ADR”) provider, ADR providers only deal with contractual disputes relating to operators’ terms and conditions. As an operator’s safer gambling procedures typically do not form part of its terms and conditions, ADR providers are unable to adjudicate complaints related to social responsibility or gambling harm.

As such, where dispute resolution processes between an operator and the consumer in relation to social responsibility are unsuccessful, the current framework provides no opportunity for that consumer to seek redress other than through the courts, which is unlikely to be an attractive route.

The Government hopes the Ombudsman will provide proper redress for those consumers whose legitimate complaints on social responsibility issues are currently ‘slipping through the cracks’.

What will an Ombudsman look like?

The Government has mandated that the Ombudsman must be fully operationally independent and credible in the eyes of customers and suggested it could be one of the industry’s current eight ADR providers, two of which are already members of the Ombudsman Association, meaning those providers already meet certain standards which the Ombudsman would need to meet (including transparency, accessibility, and fairness). The Government has noted that conferring ombudsman functions on an existing ADR provider that was a member of the Ombudsman Association would not require any primary legislation, and we therefore expect that the Gambling Ombudsman will be one of those two existing ADR providers (and quite possibly the Independent Betting Adjudication Service (“IBAS”), which gave a briefing on its plans to become the Ombudsman in July last year).

What powers will it have?

As a non-statutory body, the Ombudsman’s decisions will not be binding on operators. The Government has made clear that it expects the Betting and Gaming Council (“BGC”), as the main industry body, to play a key role in organising the Ombudsman and providing it with resources, as well as ensuring high public confidence in its abilities. If the Ombudsman does not deliver the consumer protections envisaged in the White Paper, a statutory ombudsman will be created.

The White Paper notes that the Ombudsman will not only provide financial redress but also a wider range of remedies, dependent on the given circumstances and specific facts of a dispute

Operators, take note…

The Ombudsman should also help operators identify ways to improve their processes and reduce the likelihood of similar complaints arising in the future, but the Government has made clear that the Commission should use the data collected by the Ombudsman to map patterns in complaints, focusing its enforcement activity and helping the industry improve its processes to support vulnerable customers. To avoid further scrutiny by the Commission, operators should ensure that they are implementing their social responsibility procedures and processes properly, and that their complaints process provides proper redress for consumers with legitimate complaints.

The affordability issue:

The Ombudsman will tackle the complex task of determining when gambling behaviour becomes ‘excessive’ or ‘unaffordable’ and when an operator should have stepped in to prevent gambling harm. Such evaluations are rarely straightforward, almost always subjective, and will be unique to each case. The Ombudsman will also have the unenviable task of maintaining consistency in its decision-making in light of the fluid nature of the Commission’s expectations and requirements for operators. This job appears all the trickier as there is currently no detailed guidance on customer interaction available for operators (as the Commission suspended the guidance it initially published in June 2022, subject to further consultation) and the Ombudsman’s decisions will be linked inextricably to the new requirements in respect of ‘financial risk checks’, which will mandate the levels at which operators should conduct a ‘frictionless’ affordability assessment of a customer’s gambling. If operators can’t be clear as to what exactly the requirements around customer interaction are, it’s not clear how the Ombudsman will be able to adjudicate. Whilst the introduction of financial risk checks is a key area of priority for the Government and the Commission, it remains to be seen whether the technology to conduct such ‘frictionless’ risk checks even exist. It will be interesting to see whether the Ombudsman is able to begin adjudicating before those new requirements are in place, and if so, how it will navigate the thorny issue of affordability.

What next?

The White Paper is clear that the process for appointing the Ombudsman will begin in summer 2023, and the Government expects the Ombudsman to be adjudicating complaints by summer 2024.

We will continue to review the progress on the creation of the Ombudsman and report on material developments over the coming months, so watch this space.