Increase in harmful gambling is partly fuelled by irresponsible credit

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Increase in harmful gambling is partly fuelled by irresponsible credit

Gambling is common among financially vulnerable people, addictive and problem gambling is increasing, and there is distressing evidence that people are fuelling an addiction to harmful gambling with credit they should not be able to access.

A new report based on analysis of over 100 million financial transactions from more than 77,000 people with an average annual income of £24,000 reveals:

  • Problem gambling is commonplace and has increased in the past year.
  • One in eight people spend more than £500 per month (at least a quarter of their income) on gambling transactions; 8% spend more than £1,000 per month.
  • Credit scores appear completely ineffective at predicting problem gambling. Many lenders do not identify it among applicants and there is distressing evidence that people are fuelling an addiction to harmful gambling with credit they should not be able to access.

Read our report here: 

 

The report is based on analysis of the financial transactions of 77,000 people who applied for credit to Salad Money, with an average age of 41 and average monthly income (including wages and any benefits) of £2049. 5,300 were accepted with the remainder turned down on the basis of affordability. It also found:56% of the 77,000 applicants (mainly NHS and public sector workers with ’near-prime’ and ’sub-prime’ credit profiles) have evidence of gambling in the last 3 months.

22% of applicants spend more than £100 per month on gambling.

  • Salad Money declined 29% of applicants in January 2023 because of the level of gambling; in January 2022 it declined 25%.

This isn’t ’social’ gambling:

  • 1 in 12 (8%) of all applicants to Salad have an average gambling spend of over £1,000 per month.
  • Of those declined for gambling, over half spend more than £350 per month on average.
  • For people declined, gambling accounts for 16% of their entire expenditure on average, but gambling is half of their expenditure for 6% of them.

Gambling propensity is not correlated with consumers’ credit ratings and many other lenders are not identifying problem gamblers:

  • Gambling transactions are not visible to credit reference agencies so their data is 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” is 34 with a net monthly income of £2,800:

Between November 2022 and late January 2023 Applicant B made 155 gambling payments totalling £33,900. £28,900 in “winnings” were paid back into the applicant’s account.

Over these three months Applicant B was granted five high cost loans totalling £2,100 followed by two sub-prime loans totalling £3,500.

In January 2023, “B” applied for a £1,000 Salad Money loan which Salad declined based on analysis of the applicant’s financial transactions.

Baroness Evans (Conservative) and Lord McNicol (Labour) of the Salad Projects Oversight Body said:

"It is now four years since the UK Government promised a review of the 2005 Gambling Act to ensure it is “fit for the digital age” yet there is no sign of its publication. Delay has followed delay despite Public Health England’s compelling evidence of the financial, relationship, health, employment and educational harms associated with gambling and call for more action “to prevent and reduce” these harms. There are more than 400 gambling-related suicides every year in the UK.

"This report shows problem gambling is increasing, is prevalent across all demographics, and is not being addressed by the gambling industry. Worryingly many in the traditional consumer credit industry are making poor lending decisions for vulnerable consumers. Why are financially vulnerable customers allowed to continue gambling and granted credit to do so? Change is overdue.”

Tim Rooney, chief executive of Salad Money, said:

“Open Banking data enables our social enterprise to categorise and analyse an average of 1,600 individual transactions spanning the previous 12 months for every applicant. We use this not only to make an approval decision but to generate unique insights into applicants’ financial health because we want to use the power of this data to drive change."

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