Has the time come for the UK to establish a Gambling Ombudsman?

Talk of a possible Gambling Ombudsman has been circulating since as early as 2019 when former deputy leader for Labour Tom Watson stated that his party would establish one to protect UK consumers. Since then, further calls have been made by the Gambling Related Harm All Party Parliamentary Group (APPG), the Lords Select Committee and the Betting and Gaming Council.

Reference was also made in the UK government’s policy paper Review of the Gambling Act 2005 Terms of Reference and Call for Evidence published on 8 December 2020.

One particular focus of the call for evidence surrounds customer redress. The current route for customer complaints concerning social responsibility failings is to go through an alternative dispute resolution (ADR) approved body. Licensed operators must nominate one out of eight ADR bodies to rule on issues where the complainant has not been able to reach a satisfactory resolution with the operator directly. ADR services are provided free to customers and their rulings are binding to operators.

The policy paper specifically referred to learning from other sectors that have an established ombudsman already: “While redress through the courts is a common mechanism across the economy, some other sectors have particular vehicles to facilitate easier consumer redress, such as an ombudsman.”

Further to the UK government’s paper at the end of 2020, the Betting and Gaming Council (BGC) revisited the conversation again in July 2021 by throwing its full backing behind the idea for a Gambling Ombudsman. The BGC is proposing that it should be a legal requirement for all licensed betting and gaming operators to sign up to a new ombudsman, should one be created.

Audrey Ferrie, legal director at Pinsent Masons LLP, also supports the proposal. “In terms of customer redress and the way the system operates at present, greater clarity is needed for consumers and operators.” Ferrie explains that the current ADR bodies have very limited powers and the maximum compensation they can award is £10,000.

“Something more structured like an ombudsman does seem to me to fit the bill. We’ve seen how it can work in the financial services industry, for example. I don’t imagine that operators in that sphere would regard it as perfect, but I certainly think it’s an improvement on what we have in the gambling sector at the moment, which is a great deal of uncertainty, and that isn’t good for operators or consumers,” she adds.

Pinsent Masons LLP legal director Audrey Ferrie

Both the collapse of Football Index and the Andrew Green case against Betfred, where the operator refused to pay his jackpot winnings due to a software glitch, highlight the current gaps in the system for customer redress, resulting in consumers having to go down the path of private litigation to reach a resolution.

Matt Zarb-Cousin, director of Clean Up Gambling, says: “There absolutely needs to be these kinds of options in place for gambling consumers. There’s so much money that is generated by the gambling industry, taxes and licence fees that are paid, that you would really hope the provisions for consumer redress and for upholding consumer protections are at a higher level than other sectors of the economy.”

Zarb-Cousin agrees that there needs to be a Gambling Ombudsman but that it should be independent of the gambling industry with a regulator backing it up and “that its primary focus is ensuring consumer rights are upheld”.

Well-funded and resourced

The Ombudsman Association (OA), a membership body for ombudsman schemes and other complaint handling bodies, states that any ombudsman established should meet its criteria of independence, fairness, effectiveness, openness, transparency and accountability. According to its CEO, Donal Galligan, an ombudsman scheme can be:

• a public body established via primary legislation
• underpinned by statute (i.e. legislation that mandates there should be an ombudsman and that all firms in the sector should be signed up to it, without creating the organisation itself)
• a not-for-profit company that is awarded a contract to provide the service

One concern is that if an ombudsman was established, it has sufficient funding and resources. “It’s important that any scheme that is set up is properly funded, because if it is not properly funded then they won’t have the resources and it won’t fulfil its purpose,” explains Ferrie.

Zarb-Cousin echoes the need for the ombudsman to have sufficient resources to deal with the likely heavy caseload at the start of its implementation. “The amount of money the sector generates is not an insignificant amount and there are resources there to make this happen.” He also points out that ombudsmen in other sectors, which have far greater numbers of consumers, are proactive rather than reactive. “They don’t just react to complaints from consumers, they take action against operators.”

Both Ferrie and Jon Duffy, senior vice-president of corporate assurance and regulatory affairs at Genting UK, envisage that a Gambling Ombudsman would be funded by operators themselves. “It should certainly be free to customers to use in the same way IBAS [Independent Betting Adjudication Service] is. I don’t see any other likely output,” Duffy says.

Zarb-Cousin doesn’t think the ombudsman’s independence and integrity would be undermined if it was funded by licence fees, gambling operators or a levy as long as it was a statutory arrangement. “In the same way that in order to have a gambling licence you have to pay licence fees to the Gambling Commission, you would also have to pay licence fees for an ombudsman,” he suggests.

However, Ferrie warns that it could be quite costly to set up: “The knock-on effect will be perhaps more costs for operators because the Financial Services Ombudsman is funded by levies on the industry. A properly funded and properly structured ombudsman service isn’t going to come cheaply, so everyone has to bear that in mind.”

Falling through the cracks

Some of the customer complaints that aren’t covered by the current system relate to social responsibility failings and quality of service as neither is dealt with by ADR bodies such as Independent Betting Adjudication Service (IBAS) or the UK Gambling Commission (UKGC).

Zarb-Cousin expects consumer complaints to be directed to the ombudsman. “If there are grounds for enforcement action because of a breach of licence conditions, then that can be pursued by the Gambling Commission separately. But the redress should be pursued by the ombudsman on behalf of the consumer. That’s what’s fallen through the cracks. The Commission doesn’t act on behalf of the consumer.”

The consensus among industry experts is that the Gambling Ombudsman would deal with customer complaints and have the power to issue compensation while the UKGC continues to impose regulatory fines. However, it is expected that the two bodies would work side-by-side and collaboratively.

Zarb-Cousin believes there needs to be a cooperative relationship but the two should be independent of each other. “The ombudsman has to be independent of the regulator in order to, in some cases, hold the regulator to account if there have been failures. Equally, it ought to pick up data from the operators if it’s taking on cases on behalf of consumers. And if there has been a failure or a breach of licence conditions, that data should be shared with the Gambling Commission if they want to take enforcement action,” he explains.

Ferrie compares this with the example of the Financial Services Ombudsman which doesn’t impose penalties on operators; that instead falls under the remit of the Financial Conduct Authority. “A Gambling Ombudsman won’t allay the need for a regulator, so they would have to operate side by side and you’re subject to all the usual memoranda of understanding that exists at present,” she explains.

Galligan of the OA reiterates that the most crucial aspect of an ombudsman is its independence, but that is also just one piece of the puzzle. “Ombudsman schemes are most effective in sectors where they work closely with a regulator and other accountability bodies, providing the intelligence for any regulatory or enforcement action that might be necessary. Ombudsman schemes will also work with advice and advocacy bodies to ensure people understand their rights and to gather information on emerging issues and will work with the sector itself to drive improvements in complaint handling and service delivery.”

Pinsent Masons’ legal director goes on to say that there could be cases of complaint that would subsequently trigger enforcement action by the UKGC. “The Gambling Commission might consider the contents of a complaint to be sufficiently serious for them to investigate the operator. In addition to imposing a fine, they can suspend a licence even on an interim basis. So, I think there will be cooperation. And it may be that they will consider the same facts, but they’ll have a different remit in dealing with those facts.”

If a Gambling Ombudsman is set up, there’s a risk it ends up being overwhelmed with a huge case load including customers complaining about wrongly settled bets. Ferrie agrees that initially there could be a significant number of complaints and highlights why it is important there is clear criteria in place for claims. “Of course, there’ll be many people who have justifiable complaints. But there will be many people also where the bet perhaps hasn’t worked out as they’d hoped. So, there would need to be some mechanism for dealing with frivolous complaints or complaints that were simply due to some external factor, not necessarily a behaviour or a mistake on the part of an operator,” she remarks.

First point of call

There are currently eight approved ADR bodies for gambling, so by having one central point for consumers to go with a complaint makes it much easier for all involved. A really important factor is consistency across the industry, says Duffy. “It shouldn’t matter who you complain to, you should get the same result whichever body is reviewing it, and that’s for customers and operators, of course.”

Ferrie agrees that consistency, fairness to the consumer and the operator, and consistency of decision-making should all be part and parcel of the resolution process.

Having multiple ADR providers and allowing operators to choose which one they would like to rule on the complaint also creates problems for customers, says Galligan. “The lower standards set in the ADR regulations, in comparison to the OA’s membership criteria, further contributes to that, meaning that gambling operators can opt for an ADR body that does not take an inquisitorial approach or one that is not fully independent.

“We are aware of at least one gambling operator which simply chose to ‘switch’ to a different ADR provider, after having numerous complaints upheld against them by IBAS, and the same has happened in other sectors where there are multiple, competing ADR bodies,” he reveals.

The creation of a Gambling Ombudsman could in turn spell the end of ADR bodies such as IBAS or alternatively one of these organisations could take on the remit of the ombudsman.

The OA’s chief exec says the establishment of a mandatory Gambling Ombudsman could certainly mean the end of IBAS in its current guise. “A mandatory Gambling Ombudsman would replace the current patchwork of ADR bodies. How that happens is a matter to be decided by the DCMS [Department for Digital, Culture, Media and Sport] and the Gambling Commission. There are instances in other sectors of existing ADR bodies changing their governance, structure and processes in order to meet the criteria to become an ombudsman,” explains Galligan.

Duffy believes the ombudsman should be legally mandated for all operators to sign up to it and that it’s quite possible an existing ADR could take over the reins. “I personally wouldn’t be against extending the powers of somebody like IBAS, which to me feels sensible and something that would work. They have the ability to look at these issues.”

Similarly, Clean Up Gambling’s director sees this as a possibility: “Or it might be the case that the ombudsman could maybe reroute the case work through these organisations. There could be a way of aggregating what already exists. It’s very interesting to see what the government’s proposals would be.”

Having attended a meeting held by the APPG on 1 July, Zarb-Cousin says IBAS voiced that as it is mandated and approved by the Gambling Commission, it is constrained in terms of what it can do. “If they were completely independent of the Commission and had their own remit, then that wouldn’t be the case. They would also be independent if they were funded by licence fees and independent of the gambling industry, rather than dependent on them, as they are at the moment,” he explains.

Richard Hayler, managing director of IBAS, wrote in an online piece how he was grilled by MP and chair Carolyn Harris during that same APPG meeting. “‘Tell me who funds IBAS?’ Harris asked. I doubt it came as news when I explained that IBAS was industry-funded, but she shook her head in disdain. She made it unmistakeably clear that the group could never support an ‘industry body’ considering consumer complaints. What was needed was a new, statutory ombudsman, which should be funded by a levy. It wasn’t clear what the source of the levy should be, but presumably it wouldn’t come from the gambling industry. The unequivocal conclusion was that there should be a new ombudsman and it should be statutory,” he wrote.

Model example

But before a Gambling Ombudsman can be established, what can we learn from other industry ombudsmen such as those in the financial, energy and legal sectors in terms of how it could be structured?

The Ombudsman Association addressed the idea of a gambling-specific ombudsman in response to the Gambling Act Review 2005 by providing comments to the DCMS in March 2021. One of the points raised was that “there is no need to reinvent the wheel; the issues regarding redress in the gambling sector are already addressed in other sectors by having a strong ombudsman working in tandem with a proactive regulator”.

Galligan elaborates on this point further for EGR: “Ombudsman schemes are well established in various sectors both in the UK and internationally. There is much that can be learnt from ombudsman schemes operating in other sectors, for example the way the Financial Ombudsman Service deals with issues of affordability when investigating complaints around loans, or how the Energy Ombudsman works with the regulator and the advocacy sector to protect those who are vulnerable.”

As to which other industry ombudsmen the gambling sector could learn from, Ferrie refers to the Financial Services Ombudsman in particular. “I do think it would be helpful to have the sort of bands that they have in the Financial Services Ombudsman. The maximum now is £355,000. So, they do have the power to deal with large sums of money or significant claims.”

Zarb-Cousin certainly sees merit in learning from and replicating successful ombudsmen in other industry sectors. “Energy is an interesting example. All of these things need to be worked through. At the moment, I think everyone can agree that the current system of ad hoc redress that is pursued individually at a cost to the operators as well is unsatisfactory. There absolutely are models that can be replicated,” he remarks.

While the consensus is strongly in favour of an industry-specific ombudsman, it’s likely this will come out of the Gambling Act 2005 review, so there may be a few more years to wait until the industry sees its own ombudsman come to fruition.