Lord McNicol (Labour) and Baroness Evans (Conservative) call for change as analysis reveals growth in heavy and harmful gambling
Addictive and heavy gambling is increasing among financially vulnerable people, and there is distressing evidence that many are fuelling their gambling with credit they should not be able to access.
A new report based on analysis of over 200 million financial transactions from more than 177,000 people with an average net income (including any benefits) of £34,000 reveals:
- Harmful, heavy gambling is common and has increased in the past year.
- 15% of people spend more than £500 per month on gambling transactions; one in ten (10%) spend more than £1,000 per month.
- There is distressing evidence that people are fuelling an addiction to harmful gambling with credit they should not be able to access.
- Many credit providers do not identify harmful gambling and are therefore making poor lending decisions and failing in their duty to protect vulnerable customers.
- Propensity to gamble is not correlated with consumers’ credit rating, but heavy gambling is easily identified using Open Banking.
The 177,089 people whose transactions were analysed had applied for credit from Salad Money, a social enterprise and social purpose lender, between 1st January and 31st March 2024.
Salad uses Open Banking rather than credit scores to assess affordability for a loan. On average each applicant has 1,800 individual transactions spanning the previous 12 months. Salad categorises these to make an approval decision and generate unique insights into applicants’ financial health. During the three-month period:
Salad Money declined 58,555 people – 33% of applicants – because of excessive gambling. This figure has increased: it declined 29% of applicants in the first quarter of 2023 because of the level of gambling; in the same period in 2022 it declined 25%.
- 61% of the 177,089 applicants (mainly NHS and public sector workers with ’near-prime’ and ’sub-prime’ credit profiles) had gambled during the three months before their loan application (compared with 56% of applicants in the same time period in 2023).27% of applicantsspend more than £100 per month on gambling (compared with 22% of applicants in the same time period in 2023).
- 15% of applicants spend more than £500 per month on gambling (compared with 12% of applicants in the same time period in 2023).
- 10% of applicants spend more than £1,000 per month on gambling (compared with 8% of applicants in the same time period in 2023).
- In Q1 of 2024, 38.1% of male applicants and 25.4% of female applicants were declined for gambling.
This doesn’t look like a “fun flutter":
- Of those declined for gambling, over half spend more than £440 per month on average.They make 44 gambling transactions per month on average, but 13% make more than three gambling payment transactions every day.
- For people declined, gambling accounts for 17% of their entire expenditure on average, while for 6% of them, gambling accounts for more than half of their expenditure.
Gambling propensity is not correlated with consumers’ credit ratings and many other lenders are not identifying heavy gamblers:
- 76% of those spending over £1,000 per month on gambling have been making repayments to other loan companies.
- Credit bureau data is completely ineffective at identifying gambling propensity.
- Salad cross-referenced applicants (for whom it had made an Open Banking-powered lending decision) with the credit score provided by a credit reference agency. Salad declines the same proportion of applicants for gambling with sub-prime (high risk) credit ratings as it does for super-prime (meaning those supposedly representing very low risk).
- Many lenders do not identify harmful gambling; historically, gambling transactions have not been visible to credit reference agencies so their data remains a weak predictor of excessive gambling.
- Gambling is easily identified using Open Banking yet many lenders do not use this technology.
- This is leading to many tragic examples where gamblers are effectively funding their addiction with credit – such as the applicant in the case study below.
Case study: Applicant “B” (male, in his 30s, works in healthcare, approximate annual salary £23,000):
During the 12 months preceding his application to Salad Money this individual gambled a total of £99,545 and won £51,000.
During the same period he made credit and BNPL repayments totalling £17,914 and was accepted for four NEW loans from three different providers totalling £6,790. Salad declined this applicant and signposted gambling support.
Case study: Applicant “A” (male, 30s, Wales, works in financial services, approximate annual salary: £49,000):
During the 12 months preceding the application to Salad Money this person gambled a total of £347,427 in 1,136 separate transactions, spending £951 on average every day.
During the course of the year he “won” £140,359; made credit and Buy Now Pay Later (BNPL) repayments totalling £43,713 and was accepted for NEW loans from four different providers totalling £5,200. Salad declined this applicant and signposted gambling support.
Lord Iain McNicol (Labour) and Baroness Natalie Evans (Conservative), of the Salad Projects Oversight Body said:
"More than a year after we raised concerns that harmful gambling was increasing, with clear evidence of cases fuelled by credit, the picture is bleaker still. The data reveals disturbing evidence about this cohort of working people whose salary is close to the UK average. Many heavy gamblers had been granted new loans from other credit providers making astonishing decisions, like the three lenders who extended credit to Applicant B. Harmful gambling is increasing. Many credit providers are making poor lending decisions and failing in their duty to protect vulnerable customers.
"We implore policymakers and the Financial Conduct Authority, Financial Ombudsman Service, UK Finance, credit providers, the Department for Culture, Media and Sport (DCMS) and the Gambling Commission to review this evidence and act appropriately."
Will Prochaska from the Coalition Against Gambling Ads said:
"It is horrifying that people are being preyed on by the gambling industry, and that some lenders are helping to fuel that abuse. Open banking data is lifting the lid on what the gambling reform movement has suspected for a long time, and it should be a catalyst for real change in the gambling and credit markets.”
