UK credit firm says institutions are lending to risky gamblers

Data suggests lenders may be providing more than £174m a month for gamblers who spend more than they can afford to lose.

UK.- A credit technology firm has suggested that financial institutions in the UK may be lending more than £174m a month to people who spend a risky proportion of their income on gambling. Abound analysed the open banking data of its loan applicants and used artificial intelligence to assess their financial transactions over a six-month period.

Gambling on a credit card is banned in the UK, but there is little to stop customers accessing other credit lines to gamble. Abound says that it refuses credit to customers who deposit more than 30 per cent of their income into gambling accounts in six months, or anyone who deposits more than 100 per cent of their income in any one month. It says it turns down about 29 per cent of loan applicants, or 230 people a week, as a result of gambling spending.

But it warns that more traditional credit checks would not have identified such risky behaviour, meaning that many lenders are lending to borrowers in this category. It says 15 per cent of the people it declines due to gambling spending had previously secured loans elsewhere. It believes that at least £174m a week is being lent to people who would not have passed its own checks. The debt charity StepChange said this suggests lenders could be unwittingly fueling gambling problems.

Head of policy Peter Tutton said: “Previous research on the experiences of StepChange clients found that lenders are not always quick enough to spot warning signs that someone is borrowing to fund gambling. It’s important that lenders continue to evolve their approach to identifying gambling harm by adopting stringent checks and affordability assessments.”

Gerald Chappell, Abound’s chief executive, said: “Currently, lenders aren’t doing anything wrong. But the tools they are using, like credit ratings, are outdated and unable to identify many financially vulnerable potential borrowers in the online era.”

The UK government’s gambling white paper has proposed new financial risk checks for gambling. However, these would focus on losses not the amount of money deposited into an account as a proportion of income. The plan is to require enhanced checks after losses of £1,000 a day, or £2,000 over nine months. Gambling minister Stuart Andrew has claimed that only around 3 per cent of gamblers will be affected.