White Paper Series: Gambling Ombudsman – a new approach to consumer redress
Expert Insight provided by Bahar Alaeddini, a Partner with Harris Hagan

One of the cornerstone proposals of the White Paper is the formation of an independent non-statutory ombudsman to improve consumer protection and ensure fairness for consumers relating to social responsibility (“SR”) complaints about both land-based and online gambling (the “Gambling Ombudsman”). This means providing an independent, non-litigious, route to adjudicate complaints relating to SR or gambling harm where an operator is not able to resolve these.

Under section 116 of the Gambling Act 2005, the Gambling Commission has the power to investigate complaints and commence a licence review after receiving a complaint about a licensee’s activities.  However, it does not have the power to: (a) adjudicate complaints; or (b) compel a licensee to return money to customers (note: the Gambling Commission uses the word “victims” in its Advice to Government), although licensees often propose divestment as part of a regulatory settlement.  

We welcome Government’s acknowledgement of the important division between regulation and dispute resolution, emphasising the importance of the Gambling Commission not investigating customer complaints or forcing customer refunds. With the very clear expectation that the Gambling Ombudsman is established and ruling within one year, with the appointment process starting in Summer 2023, in this blog we explore this cornerstone proposal and unpick a handful of the knotty issues to be navigated.

What is an ombudsman?
The term “ombudsman” originates from the Old Norse word umboðsmaðr, meaning “representative”, and is a protected term in the UK.  An ombudsman is a person appointed to receive complaints from a complainant (free of charge), providing recourse without the costs of complaining through the courts. Generally, complaints are against a public authority although schemes do exist for the private sector. Unlike the court system which generally considers lawfulness, an ombudsman’s role is much broader and will consider and resolve individual complaints about poor service or unfair treatment. As the Ombudsman Association (the professional association for ombudsman schemes and complaint handlers in the UK) acknowledges, “[t]his is not an easy task, as it requires the scheme to balance the views of the complainant against those of the organisation and, based on the merits of the case, achieve a just result for both.”

The first ombudsman scheme in the UK was created in 1967 as a new type of public official, investigating complaints from citizens about government maladministration.  There are now over 10 public and private sector ombudsmen in the UK - including the Financial Ombudsman Services (likely to be the closest relative to the Gambling Ombudsman), Parliamentary Standards Ombudsman, Pensions Ombudsman and Rail Ombudsman - and very soon there will be another one to add to the list.

The Gambling Ombudsman
The Government wants the Gambling Ombudsman to be: 

1. “fully operationally independent”, in line with Ombudsman Association standards and commitments to complainants and organisations complained about, namely: accessibility, communication, professionalism, fairness and transparency;
2. “credible with customers”; 
3. provided by all “licensed operators...to ensure all customers are protected equally” 

If the scheme is not delivered as expected by Government or “shortcomings emerge regarding the ombudsman’s remit, powers or relationship with industry, [it] will legislate to create a statutory ombudsman.” 

Once the Gambling Ombudsman has been established, Government “will explore how best to require that all licensees ensure customers have effective access to the ombudsman” for SR complaints, potentially through licence conditions introduced by the Gambling Commission or Secretary of State. In our view, logically, this can only mean B2Cs, given that B2Bs do not have a contractual relationship with customers. 

Potential scale of unresolved complaints
2021/2022 statistics:

• 200,000 complaints are made by customers directly to operators; 
• 5% of these are referred to an ADR provider, thereby becoming a dispute;
• 6% of disputes referred to an ADR provider related to SR failings and therefore outside scope (there are limited circumstances in which an SR complaint can be considered);
• The Independent Betting Adjudication Service (“IBAS”), the largest ADR provider, received 80% of all ADR disputes across the gambling industry;
• 20% of all complaints referred to IBAS related to SR, with most of this outside scope; and
• The Gambling Commission received 1,305 so-called SR complaints via its contact centre.

Government acknowledge that current statistics are not necessarily representative of the likely volume of work that lies ahead for the Gambling Ombudsman. By way of example, it refers to the Financial Ombudsman Service that received 31,000 cases in its first year (2000/2001) rising to over 219,000 by 2021/2022. Whilst Government does not expect this overall volume, it believes “a significant increase is likely” and this seems inevitable to us, particularly with certain personal injury law firms already ready with webpages dedicated to “gambling harm claims”. 

Potential issues
The concept of an ombudsman is a good one; however, it raises several knotty issues including:

1. Remit: The Gambling Commission’s Advice to Government recommended “a new single ombudsman scheme for consumer redress…[to] replace all current ADR providers and consider all disputes between gambling operators and consumers”.  Plainly, the Government decided otherwise with the Gambling Ombudsman being limited to SR issues only! Clarity of the purpose of the new ombudsman and the scheme’s role, intent and scope, including its clear objectives, types of disputes that will and will not be investigated, when complaints can be escalated to the Gambling Ombudsman (for example, after reaching “deadlock” through the operator’s internal complaints process and if/when an operator can refer disputes) and what is a legitimate concern, will be critical for complainants and gambling businesses (“Service Users”). The ombudsman concept is rooted in claims of maladministration and injustice, which whilst fitting in a public service setting does not lend itself, at least easily, to gambling. One risk is the confusion the Gambling Ombudsman may create in an already fragmented landscape given the number of different ADR entities. 
2. “A just result for both”: More serious risks, to achieving quality outcomes and promoting the integrity of the scheme, are: 3.     Complainant: Who will be able to refer a dispute to the Gambling Ombudsman?  Will it be limited to the player, or could it include a family member, solicitor, claims management company or other appointed representative (including an executor in the event of death)?  
   1. How the Gambling Ombudsman will navigate the meaning of ‘excessive’ or ‘unaffordable’ gambling and determine the point at which the operator should have intervened, which is not an objective assessment, and it will be very heavily case specific. In its Advice to Government (at paragraphs 6.21-6.25), the Gambling Commission referred to a “helpful precedent” set by the Financial Ombudsman about irresponsible lending and considering what is “fair and reasonable”, taking into account relevant laws, regulations and regulatory guidance, standards, codes of practice and what is considered to be the good industry practice at the time. One of the biggest practical challenges for the Gambling Ombudsman will be getting to grips with ever-changing requirements for operators (which are sometimes opaque to say the least) and ensuring its decision-making process is consistent, something which will be critical for all Service Users.  
   2. Whether operators have a duty of care to customers and what this means?
   3. Suggesting gambling is “risk-free” with customers using the scheme as a way to recover losses, reinforcing negative and harmful behaviours.
3. Complainant: Who will be able to refer a dispute to the Gambling Ombudsman?  Will it be limited to the player, or could it include a family member, solicitor, claims management company or other appointed representative (including an executor in the event of death)?
4. Non-statutory: As a non-statutory body (again, against the Gambling Commission’s advice which considered legislation and a statutory body to be “essential for it to be implemented effectively”), the Gambling Ombudsman will not have the power to force operators to comply with recommendations. For the scheme to have credibility in the eyes of complainants, it will be vital for operators to accept findings and implement recommendations made by the Gambling Ombudsman, which was no doubt one of the drivers for the Government mandating the Betting and Gaming Council’s involvement in the “foundational aspects” to ensure “operators are held to account…and public confidence in the scheme is high”. Will it become a licence condition to implement the recommendations of the Gambling Ombudsman?
5. Time limit: Will there be a time limit to bringing a complaint? A reasonable cut off point (perhaps, 12 months) should be introduced. 
6. Litigation: Complaints should not be considered if legal proceedings have commenced against the operator. It will be interesting to see if the scheme prioritises complaints where legal action is being contemplated. 
7. Independence: How will independence from both the Gambling Commission and gambling industry be achieved? Whilst we acknowledge, as the Government does, the importance of the Gambling Commission having a “strong relationship” with any ombudsman, for the scheme to have credibility with operators it will be essential for it to be impartial.
8. 8.     Remedies: To secure its success, the Gambling Ombudsman will need to ensure remedies are “appropriate and take account of the impact any identified faults have had on the complainant” and explain what action can be taken if remedies are not implemented. Remedies could include practical action, an apology, a financial award (or fair compensation looking to put the complainant back in the position had the operator not “got it wrong”) and/or recommendations to the operator to prevent recurrence. The appropriateness and timing of certain remedies will need to be approached carefully, considering potential impact on therapy.  Additionally, we will need to watch this space to see whether the scope of redress arrangements blurs the lines between powers typically reserved for the regulator.
9. Financial award or compensation: Assessing the quantum and recipient of any financial award or compensation will be very complex, and may include:10.  No appeal: Decisions will be final and not appealable. Also, as the Gambling Ombudsman will be a non-statutory body, its decisions cannot be judicially reviewed. So, in what circumstances, if any, will Service Users be allowed to request the Gambling Ombudsman to review the decision? This is likely to be limited to a mistake, or if the complainant has new information with a clear reason, why it was not submitted earlier.
   1. the impact on a customer’s health (as is the case with the Financial Ombudsman Service);
   2. whether the customer could have done anything to reduce the impact of the operator’s mistake, acknowledging that sometimes - in a chain of events - it would not be fair to hold an operator responsible for all the resulting effects;
   3. in cases where the complainant is not the customer, whether certain remedies should be precluded; and
   4. directing an operator to make a payment to a problem gambling charity, or repay a debt, instead of a payment directly to the customer given the potential risk of fuelling their gambling addiction
10. No appeal: Decisions will be final and not appealable. Also, as the Gambling Ombudsman will be a non-statutory body, its decisions cannot be judicially reviewed. So, in what circumstances, if any, will Service Users be allowed to request the Gambling Ombudsman to review the decision? This is likely to be limited to a mistake, or if the complainant has new information with a clear reason, why it was not submitted earlier.
11. Funding: As the scheme will be free for complainants, it will inevitably be funded by operators. This could involve a fee for each case reviewed, or per year. Although this detail did not feature in the White Paper, the Gambling Commission recommended “[c]learly defined funding arrangements, including the power for [it] to set the fees payable by licensees” which seems wholly inappropriate (especially with a non-statutory body).  

Frontrunner
BAS is the clear frontrunner to become the Gambling Ombudsman on the basis it is the largest ADR provider, handling about 80% of the ADR disputes. This is certainly a jolly good start, but only about 20% of their 860 complaints dealt with in the last year were SR-related, so a steep learning curve still lies ahead, despite advance planning. 

Back in August 2022, no doubt following the leaks in July 2022, IBAS unveiled its roadmap for becoming the Gambling Ombudsman in the Fast Track to Fair Play briefing. This included an outline of its aims and governance framework setting out the remit of the new ombudsman, the need for new and compulsory funding from industry whilst ensuring “impartiality remains at the heart of all gambling dispute decisions” and a Fair Play Code with criteria for deciding complaints and “harmful gambling” (which remains unpublished at the time of writing). Although the White Paper is silent on funding, IBAS estimated an annual budget of approximately £3.5m and £1m to fund the transition process. In its first year, IBAS - as the Gambling Ombudsman - expects to:

• receive approximately 7,500 complaints and resolve 5,000 complaints, anticipating that some 2,000 will need to be referred back to operators to complete their internal complaints systems and approximately 500 requests will fall outside an expanded redress remit;
• receive a further 10,000 requests for advice or support from Service Users that do not progress to a dispute;
• deal with claims management companies exploring historic complaints on behalf of customers; and
• charge an average resolved case fee of £400 and a lower median fee and may charge an average handling fee of £25 per enquiry/request for assistance from operators.

Next steps
With the appointment process expected to begin in Summer 2023, we need to await the formation of (or transformation into) the Gambling Ombudsman to see how the scheme, challenges and risks will be navigated on this cornerstone proposal to improve consumer protection. Delay will only serve to antagonise the anti-gambling lobby and displease Government, increasing the possibility of a statutory ombudsman.