U.K.’s banks may unwittingly be enabling problem gamblers by the way they extend credit, the debt charity StepChange claims, using data obtained from the credit tech firm Abound, the Guardian reported August 28.
The data appears to show U.K. financial institutions may be lending over £174 million a week to persons whose share of income spent on gambling should have raised alarms.
Abound studied open banking data of loan applicants and used AI to analyze their transactions over a six-month period. It noted when the consumer deposited more than 30 percent of their income into gambling accounts during the six months, or more than 100 percent in any one month. It has turned down about 29 percent of loan applicants on such grounds. It said that traditional credit checks don’t usually uncover such customers.
Meanwhile, the government’s white paper recommendations to beef up affordability checks are sparking a hot debate, with heavy criticism coming from the gaming sector and from gambling advocacy groups who say such regulations would violate civil liberties.
The government proposes keeping track of gambling losses, rather than how much is deposited into an account. The ministry in charge of gambling argues that the affordability checks would only affect 3 percent of gamblers.
Peter Tutton, director of policy at StepChange, told the Guardian, “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.”
Abound CEO Gerald Chappell commented, “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 But the tools they are using, like credit ratings, are outdated and unable to identify many financially vulnerable potential borrowers in the online era.”
