Last week, British mortgage lenders issued a warning over the risk associated with local problem gamblers at a time when a credit card ban on gambling services has already been deployed in the country.
A campaign group of several mortgage lenders has warned that the suspension implemented by the UK Gambling Commission (UKGC) on credit card use for gambling purposes could pose a significant risk to them in case British banks do not manage to confront the rising problem gambling rates in the country. According to campaigners, the ban that came into force on April 14th could boost the pressure faced by mortgage lenders from British gamblers who are applying for financing but hide their gambling addiction.
The group shared its fears that gambling addicts in the UK may turn to some extreme measures, including remortgaging their house while hiding their problem gambling behaviour from the bank in an attempt to get fresh financing to fuel their compulsive gambling habits.
According to a report of the National Audit Office, there are currently under 400,000 Brits who are classified as problem gamblers, while a further 1.8 million individuals are considered to be at risk of developing a gambling addiction. Moreover, UK Finance has revealed that about 800,000 country nationals used a credit card to place bets in 2018.
UK Mortgage Lenders Must Check Borrowers More Thoroughly for Hidden Gambling Addiction
A few months ago, the major gambling regulator in the country – the UK Gambling Commission (UKGC) – announced a decision to suspend the use of credit cards for making money transactions with gambling websites. This resolution has been gladly welcomed by local anti-gambling campaigners, charity organisations and financial service operator as a positive measure that would help with tackling gambling-related harm that could be inflicted on individuals who play with money they do not actually have.
Despite the fact that the measure could have a positive effect for some time, some analysts, such as the co-founder of Safer Online Gambling support group, Adam Bradford, have warned that restrictions unveiled by watchdogs could actually push compulsive gamblers to start searching for other forms of credit to fuel their addiction. According to Mr Bradford, this is a real risk which local banks and lenders have to keep in mind in the months to come, as it could lead to unwanted negative consequences for them.
As explained by Mr Bradford, mortgage lenders should be aware of the gambling addict’s psychology, as such individuals usually start looking for alternative forms of credit as soon as they are cut off from a source they have previously depended on. According to the co-founder of the problem gambling support group, one of the negative consequences that the credit card ban could lead to is that British gamblers may start using their debit cards to make gambling transactions. However, Mr Bradford shared he believes that problem gamblers are more likely to turn to other forms of credit.
He reminded that compulsive gambling usually starts as some harmless piece of fun, with manageable amounts of money spent by the individuals. However, the bets quickly get bigger, and players who get hooked on gambling start to ask their friends and family for loans to fund their habit. Things even escalate to extremes, with such problem gamblers eventually remortgaging their houses.
According to Mr Bradford, individuals who have a small gambling problem would probably be a significant risk for local mortgage lenders. That is why he recommended such institutions to make thorough checks on their customers, including on the borrowers’ reasons to be looking for such financing. Stricter checks and control would not only protect the mortgage lenders’ themselves but also homeowners, as they could protect them from falling into a significant financial disadvantage.
Gambling Activities of Borrowers Could Go Unnoticed if Banks Do Not Check Their Customers Thoroughly
For the time being, UK lenders’ underwriting policies do not permit capital raising for gambling purposes. Borrowers are also asked to provide reasoning on why they are raising additional money through remortgaging their homes.
There are hardly any compulsive gamblers who would openly admit they have gambling debts, so it is normally hard for lenders to notice their vulnerability. They hardly ever check the credit card transactions history of the customers to see if they have any debts and how these debts have been run up, but they check the amount of the available credit that has been used by the customers.
The majority of UK lenders do not manually underwrite mortgage applications so they do not check bank account statements.
In case the recent ban on credit card use leads to an increase in gambling transactions on bank statements, the gambling activity of borrowers would pretty much go unnoticed. Also, even when applications are reviewed by underwriters, the gambling activity of the borrower is not a reason for a decline. Some lenders have additional measures, such as checking for recent unsecured borrowing that could be fuelling a gambling habit of the borrower.
There are also some UK banks that allow their customers to suspend spending in betting shops and online gambling sites in order to prevent gambling transactions, but the problem is that gamblers themselves need to make the decision and there is no guarantee for that, especially if an individual is addicted to gambling. Most lenders nationwide have telephone support services offering help to people who are facing difficulties as they struggle with debt.
According to a research of the Money and Mental Health Policy Institute into the possible use of financial data to support customers, more than 40% of the survey participants said they wanted to see the lender take immediate action to protect them. Such actions would include payments ban in case customers’ gambling activity increased.
- Author
Daniel Williams
