Many people with a gambling problem have been given unaffordable credit. This fueled their gambling and they got deeper into debt.
Credit is affordable if you can repay it and still pay your other debts, bills and expenses. If it is unaffordable, then you can ask for a refund of interest and charges and take a complaint the lender declines to the Financial Ombudsman (FOS).
But gambling complicates this – perhaps that loan or credit card would have been affordable if only you could stop gambling? Many people who have made an affordability complaint are worried that their complaint will be rejected because of their gambling.
This article looks at some FOS decisions that have involved gambling and affordability complaints.
FOS takes the view that a lender should not have given the credit if they knew – or should have known – that the borrower had a gambling habit.
It doesn’t matter who the lender is. As you can see from the cases below, it’s not just payday lenders, it can be major high street banks.
It is the general approach to gambling that matters here, and FOS’s approach is broadly the same across all lenders and different types of credit.
What does FOS look at when making a decision?
A lender can’t argue that the borrower should have said they had a gambling problem
Case 1: The fact the customer had not told the lender he had a gambling problem isn’t relevant:
if it had looked at Mr H’s bank statements, it would’ve quickly realised Mr H was gambling and that Mr H couldn’t afford to repay. I don’t think Mr H’s failure to tell Mr Lender about the gambling means he shouldn’t receive compensation as Mr Lender didn’t carry out proportionate checks.
Gambling isn’t discretionary expenditure
Case 2: Payday UK argued that the adjudicator shouldn’t have considered gambling transactions as part of Mr C’s expenditure when looking at affordability as they weren’t essential expenditure.
The Ombudsman didn’t agree:
Mr C’s bank statements show he was regularly spending quite a lot of his income on gambling by this point. So if Payday UK (having a full understanding of his circumstances) was thinking about what Mr C would have available the following month, based on his previous spending patterns I think it’s likely he would’ve continued to spend similar amounts on gambling.
I don’t think it’s fair to say Mr C’s spending on gambling was discretionary at this point.
Gambling showing on bank or credit card statements
Case 3: SafetyNet Credit had access to the borrower’s bank accounts. In this case, the borrower was on a good income:
Mr M was working and typically received an income in the region of £3,000 each month. Some months he also received a bonus in addition to his regular salary. This income is not however significant when comparing it to Mr M’s expenditure.
[SafetyNet Credit] had more than enough information to accurately consider Mr M’s financial position… it should have been obvious that Mr M was living beyond his means, which was likely to have been caused by his compulsion to gamble.
I think that the lending from SafetyNetCredit, and other parties, was used to fund his gambling or other existing commitments, which he couldn’t afford because he’d already spent money on gambling. It seems as though he was caught in a significant cycle of lending and gambling.
Case 4: Vanquis increase a borrower’s credit card limit despite significant amounts of gambling transactions on the credit card. The Ombudsman decided:
I’m not convinced that it can be fairly or reasonably said that any of the subsequent credit limit increases can be considered as being affordable or suitable for Mrs B at the times that they were implemented. And I say this because of the usage of Mrs B’s Vanquis credit account, which demonstrated a high number of gambling transactions which I feel should have given Vanquis cause for concern, as well as the deteriorating wider financial position of Mrs B, as demonstrated by her credit file…
Vanquis explained to this service that they wouldn’t discriminate against an account holder on the basis of how they use their account. But I’m not convinced that this argument can be considered reasonable when an account holders’ transactions highlight a potential gambling addiction.
Lenders should check all accounts a customer has
Case 5: RBS increased a borrower’s overdraft limit significantly and gave him a large loan despite gambling showing on his bank statements. The decision:
A cursory look at Mr B’s statements showed that he’d been gambling significant sums in the lead up to the overdraft increase… Mr B had gambled in excess of his declared monthly income and this had taken him close to and marginally over his existing credit limit in the month proceeding the increase.
In these circumstances, I thought that it ought to have been apparent that there was a significant risk Mr B might have struggled to sustainably repay what he already owed. And he was therefore unlikely to have been able to repay any additional credit without undue difficulty or borrowing further.
Bearing this in mind, I was minded to find that RBS shouldn’t have increased Mr B’s overdraft limit April 2019 and also suspended the use of his facility. And considering the monthly loan payments of just under £800 also took up just under half his monthly income, I found that RBS shouldn’t have provided Mr B with a loan in April 2019 either.
Case 6: Nationwide gave a customer a credit card with a large limit, £6,500, despite gambling showing on bank statements:
When conducting my own review of the performance of Ms B’s Nationwide current account – as Nationwide described that they would themselves have done – it’s of immediate and obvious concern that Ms B was consistently overdrawn throughout this period, often by significant amounts and close to the overdraft limit.
Nationwide explained to this service that they wouldn’t decline a customer’s credit application solely on the basis that the customer maintained a consistently overdrawn balance with them. I can understand Nationwide’s point here, to a degree, but it would be expected that the consistently overdrawn performance of Ms B’s current account would have been of concern here and should have prompted a more detailed check.
And, had Nationwide checked the statement transactions for Ms B’s current account for the months immediately prior to the credit account application, it would have been seen that these included a large number of gambling transactions. Because of this, I find it difficult not to conclude that Nationwide would, or should, have arrived at a different decision with regard their approval of Ms B’s application for credit, had they undertaken a more thorough check.
When lending continues, lenders should look for warning signs
Case 7: Lending Stream had given a series of loans to the customer over several years. It argued that:
it was for Mr P to provide accurate information about his income and outgoings. It said it wasn’t required to make further checks if the loans looked affordable.
The Ombudsman agreed that Lending Stream did enough checks on the first loan and was entitled to rely, at that point, on the customer’s information about his outgoings. But:
… Lending Stream’s check showed that Mr P was heavily and increasingly in debt to a range of lenders. The amount of his debt had increased greatly by the time of his second loan…
… He had credit card and short term loan debts. He was reliant on increasing short term loans to fund his gambling habit and his living expenses. I think if Lending Stream had made further checks it would have seen, as I have, that Mr P was dependent on short term loans. And so it would have decided that giving him further loans would be irresponsible.
Check what the customer tells you
Case 8: Everyday Loans spotted a lot of gambling on the one bank statement it asked the customer for – he explained that he didn’t have a gambling problem and had closed his account. But the Ombudsman decided:
Mr C’s gambling expenditure was significant. In the month before he applied for the loan he had spent an amount in excess of his normal income.
Mr C’s earlier bank statements show clear evidence that he was in fact regularly spending large amounts on online gambling transactions. It is clear from those statements that the spending wasn’t, as Mr C had suggested, simply related to the summer football tournament. His statements appear to show that he was in fact suffering from an addiction to gambling, and he was funding that expenditure by borrowing from a range of other lenders. I don’t think, had it seen that additional evidence, that [Everyday Loans]would have agreed to give this loan to Mr C.
Case 9: George Banco gave a guarantor loan to consolidate payday loan credit without considering the borrower’s full circumstances:
George Banco hasn’t provided any evidence to show how it understood which [payday loans] would be repaid and at what cost. I can’t see that it could make a fair lending decision without knowing this. In addition, Mr S was spending a significant proportion of his income on what seem to be gambling transactions in the months prior to this loan. So from this, combined with his reliance on payday loans, I think the lender ought to have realised Mr S was having problems managing his money and there was a high risk he would be unable to sustainably repay this loan.
Hard to win complaints
Not every complaint involving gambling is upheld.
Cases where the loans are small and someone only borrowed a few times are always difficult to win regardless of the gambling element. The lender often just didn’t know enough to see that the borrower could be in trouble and the amount of credit was so small detailed checks did not need to be made.
Case 10: A Myjar case involving five loans. Here the lender had offered to remove the interest from the last loan and accept a repayment plan but the customer felt that was insufficient. The Ombudsman agreed that only refunding the last loan was reasonable as the loans were small so the checks made were proportionate.
It is also hard to win cases where gambling has only recently become a problem. If you have a good credit record and are well paid, there may be no warning flags that suggest a lender should look in detail at your application.
The “standard” compensation
FOS awards in the vast majority of cases
The standard compensation if an affordability complaint is upheld is for interest to be refunded. If a balance is still owing, the interest refund first reduces the balance and any remaining amount is refunded in cash.
The effect is that people have to repay the amount they borrowed but not any additional interest or charges added.
FOS says about credit records:
We’d typically expect a lender to remove any adverse information on a loan, from the borrower’s credit file, where a complaint is upheld for irresponsible lending.
The refunds and credit records also include taking account of payments made to a debt collector if the debt had been sold, and removing (the legal term is set aside) any CCJ.
It is very unusual not to have to repay what was borrowed
This only tends to happen when the lender was specifically aware that the borrower had a major gambling problem – not by working it out from bank statements but because of previous interactions with the customer where gambling had been discussed.
Case 10: Lloyds gave a customer who had asked for a gambling block on her account two large loans within 6 months, both were said to be for the pur[pose of buying a car. The first loan had been repaid soon after it was given. The Ombudsman found that Lloyds had made reasonable checks for the first loan, but not for the second much larger loan:
The entire amount of the funds advanced for loan 1 were transferred to a betting company, which transactions to were supposed to be blocked, the day after the funds were provided. Lloyds said the use of a third-party service to make the transfers meant that any gambling block would have been negated. Although I wasn’t entirely persuaded by this argument given the payments were made using a well-known third-party payment service to a highly recognisable high-street betting company, which Miss D had been told transactions to had been blocked, clearly appeared within the transactions…
Lloyds chose to lend [the second loan] in these circumstances despite the reasonably foreseeable prospect of
the funds dissipating as a result of being gambled away and being no longer available to repay any debt as a result…
I don’t think removing the interest fees and charges goes far enough. The circumstances of this case and in particular the financial hardship which is likely to be caused by requiring Miss D to pay funds she doesn’t have and is unlikely to get, lead me to think that the fair and reasonable thing for Lloyds to do here, given all the circumstances, is write off the outstanding balance on loan 2…
it seems to me removing adverse information from Miss D’s credit file, increasing the chances of her being able to borrow further would be counterproductive and arguably not in her best interests, or those of any potential lender. So I think it’s fair and reasonable for Lloyds to reflect what I’m asking it to do in relation to the outstanding balance on the loan and record it wrote off a balance on this loan on Miss D’s credit file.
How to complain – tell your story
There isn’t a special template for gambling related complaints. Instead, use the template letters for affordability complaints that is right for the sort of credit you are complaining about, see links to the refund templates.
If a lender rejects your complaint, you can send it to the Ombudsman. You can’t go direct to FOS.
If one of these cases above sounds a lot like your situation, this doesn’t mean you will get the same result. But as you can see from these cases, FOS doesn’t start from the position that it is your fault you were gambling.
When you are sending a case to FOS, be completely open about your gambling problem and the way it interacted with your borrowing from this particular lender. Just tell your story.
And do send your bank statements and a copy of your current credit report – they are the evidence that supports your complaint!
But if you are still gambling…
You can make an affordability complaint if you still have a balance owing to the lender (or debt collector if it has been sold).
But making these complaints if you still have a gambling problem is pretty pointless. If you get any money back you will probably soon be donating it to the bookies and their shareholders…
I know it’s hard, but you need to stop gambling first. Then when you have been “clean” for a while, these complaints can help rebuild your finances.