2.1
This chapter considers the evidence received on the Interactive Gambling Interactive Gambling Amendment (Prohibition on Credit Card Use) Bill 2020. The following key issues will be discussed:
possible models for prohibiting credit card use;
potential unintended consequences; and
other matters, including definitions in the bill and consideration of additional amendments.
2.2
The chapter concludes with the committee's view and recommendation.
Context of the bill
2.3
The Interactive Gambling Act 2001 (Interactive Gambling Act) regulates companies that offer or advertise gambling services. The Act covers all gambling that takes place online, through a website or app and via a telephone.
2.4
Currently in Australia, credit cards cannot be used when gambling in licensed venues, casinos and TAB outlets. Online gambling activities are not regulated in the same way however, which means that credit card use is permitted when gambling online.
2.5
The inquiry highlighted that online wagering 'is the fastest growing segment of the Australian gambling market' with estimates suggesting that approximately one third (34 per cent) of people who placed a bet on sports, racing, or other events in 2017–18 did so via the internet. This was an increase from the 16 per cent reported in 2011–12. The Australian Banking Association (ABA) submitted that online gambling now accounts for 55 per cent of all gambling, with 25 per cent of Australian adults having gambled online in the past 12 months.
2.6
While currently there is no legislated prohibition on credit card use for online gambling, some actions are being taken to limit or restrict credit card use for online gambling as well as to provide greater protections for individuals engaging in online wagering. The Australian Banking Association (ABA) detailed mechanisms that can be employed by banks to limit credit card use for online gambling:
Many ABA member banks have introduced mechanisms to limit the harm that can result from the use of credit cards for online gambling. Most banks have developed technology solutions including tools to track and cap spending and initiate customer directed blocks. Banks have trained customer support teams and provided referrals to support services. Some banks block all forms of spending on their credit cards from gambling merchant codes.
2.7
Similarly, the Customer Owned Banking Association (COBA) described actions being taken to either prohibit gambling on credit cards or allow consumers to self-exclude from certain transactions:
Selected credit card issuers in Australia have chosen to introduce measures that either prohibit gambling on credit cards or allow consumers to self-exclude from transactions to gambling MCCs [Merchant Category Codes].
Some issuers proactively monitor gambling exposures and prohibit certain credit cards from being used at specific gambling sites to address the higher risk of fraud, particularly with online gambling. Other issuers place transaction limits or caps on percentage of the total credit card limit being used for gambling purposes.
Some issuers have voluntarily placed blocks based on gambling MCCs for risk management purposes.
2.8
The National Consumer Protection Framework for Online Wagering (National Framework), developed and implemented by the Commonwealth, states and territories, consists of 10 key measures aimed at reducing any potential harm that can be caused by online wagering. According to the Department of Social Services, the National Framework 'provides – for the first time - strong, nationally consistent protections for consumers of Australian interactive wagering services'. The measures place obligations on online wagering providers to better inform gamblers of their wagering activity as well as establishing a range of mechanisms to assist individuals to better control their gambling, such as a voluntary opt-out pre-commitment scheme and a national self-exclusion register. The National Framework applies to approximately 131 wagering service providers and their account holders effectively covering approximately two and a half million active online wagering accounts in Australia.
2.9
The Australian Communications and Media Authority (ACMA) also has a role in minimising harm from online wagering and is responsible for two key measures under the National Framework. These measures prohibit licenced interactive wagering services from providing 'credit betting' via credit to customers or facilitating credit by third parties (such as payday lenders).
2.10
While submitters generally reflected positively on actions taken by banks and other financial institutions to limit an individual's ability to use credit cards for gambling, it was suggested by some that stronger and more definitive action is required. These issues will be discussed in the following section.
Support for the bill
2.11
The bill seeks to minimise the scope for problem gambling among Australians by banning the use of credit cards for online betting through certain regulated interactive gambling services. A second key aim of the bill is to ensure consistency in the regulation of using credit cards for online and offline gambling. Several submitters and witnesses supported the purpose and intent of the bill. For example, the Alliance for Gambling Reform stated:
[Our organisation] strongly supports the prohibition of gambling with credit including using credit cards, based on the principle that people should not be encouraged to gamble with money they do not have. The amendments simply extend the existing ban on providing or promoting credit for gambling to include third party credit in the form of credit cards. This provision, we believe, should apply to all forms of gambling, including online gambling where risk of harm is highest.
2.12
The COBA agreed with the 'proposition that online and offline gambling should be treated the same with respect to the use of credit cards' and supported the bill's 'intention to align this'.
2.13
The ABA reported relevant findings from a consultation process it undertook to seek community views about the use of credit for online gambling:
Submissions to the ABA consultation pointed out that considering individuals cannot use a credit card at a TAB, in a casino or at the track, but can gamble online using their credit card or can transfer money from their credit card into an online app to gamble, it is timely for the government to make consistent rules and modernise the Interactive Gambling Act.
2.14
Dr Livingstone, an academic from the School of Public Health and Preventive Medicine, Monash University, remarked that 'credit cards are largely prohibited in terrestrial gambling forms' in Australia and given there are alternatives such as debit cards and direct transfers of cash, 'it seems logical and reasonable to extend the prohibition on credit to the internet gambling platforms'. Dr Livingstone stated that 'the prevention of harm would suggest that this is a step forward and an important measure'.
2.15
The Australian Institute of Family Studies described some of the potential benefits from restricting access to credit card payments for online wagering:
The effect of the bill would be to constrain some of their [people participating in online gambling activities] ability to act impulsively and chase losses. In that sense, it's trying to provide some friction in relation to people's gambling behaviour, which the evidence suggests would benefit some people because it might reduce their propensity to engage in risky behaviours without actually stopping them gambling. If they want to gamble, they can do it in a more planned and mindful way rather than in an impulsive way.
2.16
Similarly, other inquiry participants emphasised that the proposed prohibition on using a credit card for online gambling could contribute to the reduction of gambling related harm. The Alliance for Gambling Reform for example described the bill as providing a 'significant step forward in addressing...the harm that credit gambling does cause'. The Synod of Victoria and Tasmania, Uniting Church in Australia argued that a 'prohibition should be implemented as soon as possible to stem the harm credit card betting is causing'. The Centre for Health Equity Training, Research and Evaluation (CHETRE) argued that the bill would 'prevent and minimise further gambling related harm in Australia'. In its view, the bill would build on other initiatives already introduced to limit access to credit when gambling.
2.17
It was recognised by some witnesses that such harm reduction was not only important for the individuals affected, but for others 'around the people at risk of gambling harm' also. For example, the AIFS referred to research that has found that, on average, six other people are directly affected by a person who's gambling at high-risk levels.
2.18
Using credit cards for online gambling raised particular concerns amongst some submitters, in part, due to the level of harm which can occur 'when credit cards get maxed out and start being used…to chase losses'. The AIFS observed that 'credit cards, which use borrowed money, in contrast to debit cards or online wagering accounts with pre-existing funds, can facilitate gambling with money that participants do not have. The Salvation Army highlighted concerns that 'credit card-enabled gambling enables significant debt to accumulate very quickly'. Furthermore:
Gambling addiction is an impulse control disorder and the ease of using a credit card means that barriers or physical cues that can assist people to manage their impulses do not exist. This is particularly so when gambling online.
2.19
On the issue of harm associated with using credit cards for online gambling, Dr Sally Gainsbury, from the Gambling Treatment and Research Clinic at the University of Sydney explained that further research would assist to develop a greater understanding on these issues. In particular, studies have shown that 'people who gamble online are more likely to report that the…[online spending] increases their propensity to spend money' but that there has been limited research conducted 'directly on the topic of credit cards in the gambling field impact'. Dr Gainsbury argued that the existing research
…does not tease out whether it was credit cards or whether you were putting numbers in online or whether it was bankcards or anything directly like that—it doesn't directly talk to credit cards. Unfortunately, that's the case with most research that hasn't specifically looked at the credit aspect of online payments to say on which particular aspect of the online payments we know people do spend more when they are online. There is a disconnect between cash and digital spend. People don't feel aware of how much they are spending and it is easier to spend the money—there is the salience of the funds. But we don't have a lot of research directly on the topic of credit cards in the gambling field. This really is an area that requires further investigation.
Possible models for prohibiting credit card use for online wagering
2.20
Some inquiry participants argued that a legislative response was the most advantageous method to prohibit credit card use. It was observed that a prohibition [would]…be far more effective in reducing harm, than providing individuals with the ability to block a credit card from being used for gambling. These submitters argued that stronger industry regulation is necessary to maximise initiatives seeking to reduce harms associated with gambling activities.
2.21
The Gambling Treatment and Research Clinic, University of Sydney posited that prohibiting 'the use of credit card payments for online wagering would be consistent with contemporary policy and regulatory developments in comparable international jurisdictions', most notably the United Kingdom where a ban on the use of credit cards as a payment method for gambling products (offline and online) was implemented in April 2020. The Personal Finance Research Centre at the University of Bristol reported that an evaluation of the UK ban is planned for 2021 and the ban is widely expected to achieve a step change in the reduction of harm from credit-based gambling, and especially for gambling-related debt.
2.22
The COBA supported the bill's intention 'to place obligations on online gambling service operators to restrict the use of credit cards'. In its view, placing an obligation on gambling operators is 'likely to be the most efficient and fairest way to reduce some of the risk of using gambling services and credit cards'.
2.23
While Tabcorp did 'not oppose a ban on the use of credit cards for online wagering', it pointed out there are existing established controls in place to minimise and mitigate gambling harm. Tabcorp identified several unintended consequences of the bill which are discussed later in the report.
2.24
Responsible Wagering Australia's (RWA) position on the bill developed during the course of the inquiry although it continued to maintain that a legislated ban was unnecessary. In its initial submission to the inquiry, RWA stated it did not support the bill, arguing that there 'is no compelling evidence to indicate links between the use of credit cards across online betting platforms and the incidence of problem gambling' and referred to existing safeguards in place 'specifically for consumers of Australian interactive wagering services'.
2.25
RWA explained that credit card holders are 'subject to consumer credit and background checks on their ability to manage an agreed credit limit safely and responsibly by or on behalf of the card issuer using impartial criteria'. In addition:
Credit and lending criteria are enacted through the National Consumer Credit Protection Act 2009 and backed by a range of supporting frameworks from the Australian Securities and Investment Commission, the Australian Prudential Regulation Authority and through the banking industry code of practice.
2.26
In further evidence to the committee, RWA advised:
Australia's major online wagering operators will support development of measures to prohibit credit card wagering.
Responsible Wagering Australia members have agreed to develop a technical solution to deliver this reform in a timely fashion and will seek the assistance of banks and payment processing providers to ensure the change can be delivered without adverse unintended consequences.
Responsible Wagering Australia members acknowledge concerns expressed by policymakers and the community sector and will seek to develop measures which harmonise the online environment with gambling at clubs, pubs and casinos where credit card use is prohibited.
2.27
RWA explained that it held an initial meeting with the Australian Banking Association and technical representatives from within its membership on 25 August 2021 which identified a number of technical questions to be worked through. This first meeting was 'supported by dedicated working groups formed from within the RWA and ABA membership'. RWA emphasised it 'will continue to work towards achieving our good faith commitment to progress this issue in a timely manner…'.
2.28
Acknowledging that RWA now supports a ban on credit card payments for online wagering (albeit not by legislation), the Alliance for Gambling Reform argued:
We think legislation is absolutely necessary because, firstly, a voluntary agreement by them could be wound back at any time. Plus, they [Responsible Wagering Australia] don't cover all wagering providers either. Plus, there can be new entrants into the market that they don't cover. So you could quickly have it eroded by those who stay outside of that particular agreement.
2.29
Similarly, Financial Counselling Australia supported legislation to ensure that any prohibition would apply to all providers and not only those who have entered into any voluntary agreement. Financial Counselling Australia emphasised the need for the prohibition to encompass all involved parties:
There are the gambling companies, and the prohibition should definitely be on them, but in between you have the middle payment platforms. When someone sets up a gambling website, or any other website, and they offer people multiple ways to pay, those companies are called payment platforms. They come with a bunch of icons on their website, so you can pay with PayPal or POLi or Diners Club or whatever. They're part of it. They include the e-wallets. It's really important to have that. That was the advice—that you cover all three tiers and do it properly.
2.30
The Department of Social Services told the committee it is aware of the different views provided to the inquiry about the most effective way to prohibit credit card use:
We are conscious that there have been some different views put to the committee about that, as to whether it's more effectively managed through the internet gambling providers' payment system or through the banks. That's not something that we can provide a definitive response to. There are obviously pros and cons to both. Treasury has overall responsibility for the payment systems, so we can't really give a view one way or the other on that.
2.31
Another perspective presented to the committee explored the role that financial services providers can play to ensure that gambling transactions are not funded with money from credit cards. The Personal Finance Research Centre submitted:
While it is clear from our research that the regulation of financial services should by no means be a replacement for regulating gambling operators themselves, there is good evidence to suggest that financial services firms – including banks, building societies, credit card providers, credit reference agencies and many other types of firm – can play an important role in helping those affected by gambling.
2.32
The Personal Finance Research Centre argued that financial services firms could work to prevent or reduce the ease of any 'workarounds' to a credit card ban by no longer facilitating gambling transactions conducted via methods such as e-wallets. Another option is to 'help achieve a 'double-sided' block on gambling with credit cards'. This would mean that on those occasions that a gambling operator continues to take payment via credit card from an Australian customer, the bank would automatically prevent the payment from being made.
Potential unintended consequences
2.33
A number of unintended consequences of the bill were identified in evidence to the committee including:
potential impact on the broader gambling community and lotteries;
possibility that consumers would seek out other payment mechanisms;
some consumers may shift towards greater use of unregulated offshore wagering; and
increased use of third party payment mechanisms.
2.34
Issues related to these potential unintended consequences are discussed in the following section.
Potential impact on the broader gambling community and lotteries
2.35
Tabcorp argued that the bill would restrict the activities of 'customers who are not problem gamblers and prefer the convenience of credit cards', resulting in the reduction of funding to the racing industry and government revenues as well as impose restrictions on lottery sales. On the matter of lotteries, Tabcorp submitted that lottery products 'should be specifically excluded in any credit card ban'. Tabcorp argued that '[l]ottery customers have a very low incidence of problem gambling and will be unnecessarily inconvenienced by further restrictions or a prohibition that will not address the overall policy objective'. Tabcorp further explained that the credit card 'prohibition could reduce the incomes of lottery agents and newsagents by approximately $44 million per year – many of those impacted are small and family business operators'.
2.36
Tabcorp posited that increasing the transition period from six months to at least 12 months could 'limit the unintended consequences on customers, the racing industry, and lottery and newsagents'.
Shift to alternative lending sources
2.37
The possibility that 'prohibiting the use of credit cards for online wagering may drive some consumers to alternative lending sources for gambling related borrowing' was raised with the committee. It was suggested that these alternative sources such as payday lenders or pawnbrokers may not have adequate consumer protection safeguards in place and given 'the fees and interest rates charged by such lenders are typically very high, it is plausible that increased borrowing from these sources may exacerbate financial problems'. Dr Gainsbury emphasised the importance that a ban on credit cards does not 'actually create further problems by driving people to other sources of credit that are less favourable for them'. It was suggested that this possibility should be evaluated within the proposed statutory review to be conducted by the ACMA under proposed section 15M.
Increase in unregulated offshore gambling activities
2.38
The ACMA highlighted the potential risk that the measures in the bill could result in domestic customers engaging in offshore gambling activities. The ACMA submitted that offshore gambling activities pose significant additional risks to Australian consumers due to the lack of regulation and oversight in certain countries. According to the ACMA, these risks include the unauthorised use of credit cards, refusal to pay all or part of winnings and a lack of response to customer enquiries.
2.39
The Gambling Treatment and Research Clinic similarly identified the risk that the bill 'could potentially lead some consumers to shift towards greater use of unregulated offshore wagering sites which may accept credit card payments'. Dr Gainsbury observed that although the centre's research does not 'suggest there would be a huge push towards offshore gambling sites', it is an issue that 'should be monitored for in terms of looking for unintended consequences'.
2.40
The ACMA explained the actions it is taking to mitigate some of the risks associated with offshore gambling activities:
The ACMA has engaged with the Australian Banking Association and credit card schemes about ways that payments to illegal services using Australian credit cards can be disrupted. We understand, through this engagement, that when an illegal service provider uses a gambling Merchant Category Code (MCC) it is possible to identify and disrupt the transaction.
However, we have observed that these illegal gambling providers are increasingly using third party payment processors to mask their gambling services and the MCC can reflect services other than gambling. This can make it difficult for credit card providers, or indeed those potentially charged with regulatory oversight, to identify the illegal activity and take disruptive action.
2.41
Dr Livingstone observed that while the ACMA has had partial success with internet service providers blocking some offshore gambling sites, 'it's a bit of a game of whack-a-mole because they keep popping up under different guises'. Dr Livingstone also described a Norwegian initiative whereby people are allowed to place bets on offshore sites which aren't licensed, but banks are prohibited in their jurisdiction from receiving any payments from such sites.
2.42
When asked whether strengthening regulation related to credit card use for online gambling, either by industry, banks or by legislation, could be effective given the availability of offshore services, the Department of Social Services responded:
The efficacy of the work that ACMA is doing around blocking access to online offshore wagering is one part of the response to that. But, as I think has been expressed before, there's been a sense of whack-a-mole about that, that new services pop up, so it's an ongoing struggle to try to make sure that Australians are not wagering on unsafe overseas sites. That has been raised as one of the concerns around the introduction of limits on credit cards, whether it would drive people towards online overseas products, and I think that's a question for people to discuss. We don't have evidence one way or the other on that.
Increased use of third party payment mechanisms
2.43
Removing credit cards as a payment mechanism may lead to an increase in other payment methods that use credit cards, such as using a credit card to fund an e-wallet or to purchase pre-paid debit or gift cards. It was observed that these digital wallets can be connected to credit cards and can indirectly fund online gambling spending from a credit source.
Other matters
Definitions in the bill
2.44
Some submitters referred to definitions included in the bill and presented different views on their adequacy. Uniting Communities supported the definition of credit card capturing both 'payment by credit card' or 'payment from an account or service that relies on the payment being made from a credit card linked to the account or service'. In its view it 'is important that credit card payment cannot occur indirectly for example through a gambling account.
2.45
Financial Counselling Australia, the Consumer Action Law Centre and the Financial Rights Legal Centre commended the bill 'for including e-wallets, as this is needed if there is to be an effective ban, otherwise gambling will still be funded via credit cards, attached to e-wallets'.
2.46
The Synod Victoria and Tasmania, Uniting Church of Australia recommended that consideration be given to whether the definition of credit card in the bill 'is sufficiently broad to avoid being exploited by unethical online wagering corporations'. It was noted that following the introduction of a ban on credit card betting in the United Kingdom, 'some online gambling corporations responded by allowing people to gamble using credit via a pay-by-phone option that they promoted'. The Synod of Victoria and Tasmania submitted that the 'definition also should extend to e-wallets and all money service business products that allow for the use of credit'.
2.47
The Alliance for Gambling Reform similarly reflected that:
In terms of the bill, there are lots of things that could be done extra to this, but the bill, as we said, is a very big step forward. But probably the most immediate thing that would be helpful would be extending it beyond credit cards to all forms of credit finance. So extending it to digital wallets and any other forms of new technology that might emerge as credit payment methods would be ideal. But, even in its current form, the bill would be worthy of passage through the parliament, in our view.
2.48
Tabcorp offered a different perspective on the matter of a definition of credit card, expressing concern that the definition is 'broad' and 'would inadvertently capture betting vouchers, and potentially bonus bets' on the basis that such offers 'are essentially a promise of potential future value and therefore may be classified as "credit"'. Tabcorp advised it was its understanding that capturing betting vouchers was 'not the intention' of the bill. To avoid any confusion, Tabcorp recommended that betting vouchers and bonus bets are expressly excluded from the definition of credit card.
Consideration of additional initiatives to reduce gambling associated harm
2.49
Inquiry participants proposed additional initiatives to be considered to further reduce gambling associated harm. For example, Suicide Prevention Australia welcomed the bill but also argued that more action is required to further reduce the potential harms associated with interactive gambling. The Alliance for Gambling Reform advocated for further amendments to the Interactive Gambling Act on the basis that exemptions in existing sections 15D and 15F as well as proposed section 15L 'continue to allow harm to occur through the use of credit and they should be removed or limited'.
Committee view
2.50
The committee supports the principles of choice and autonomy for individuals, including through the responsible use of credit cards for online gambling. The committee understands that individuals applying for credit cards are subject to consumer credit and background checks to assess their suitability for particular products. In this context, the committee recognises the central role of financial institutions to issue and operate credit cards in accordance with relevant legislation such as the National Consumer Credit Protection Act 2009.
2.51
The committee is however cognisant that some individuals using credit to engage in online gambling activities may experience a degree of harm. The committee notes expert evidence that there is limited research into the drivers and the extent of potential harm. Nevertheless, for those individuals experiencing harm related to these gambling activities, it is important that appropriate protections and safeguards are available.
2.52
The committee recognises the broad support for the purpose and intent of the bill provided to the inquiry. However, evidence to the inquiry also identified several unintended consequences of the bill. One being the risk of duplication and another being definitional concerns. This suggests that a number of issues need to be resolved prior to the bill proceeding any further.
2.53
Simultaneously, the committee acknowledges the work recently initiated by RWA to develop measures to prohibit online credit card wagering in collaboration with its members, banks and payment processing providers.
2.54
In addition to this work by online gambling operators, the ACMA's recent review into the operational effectiveness of the existing credit betting prohibitions in the Interactive Gambling Act 2001, detailed in chapter 1, is likely to provide insights and recommendations for how best to respond to any potential vulnerabilities or gaps in the regulatory framework. The committee notes that the ACMA's review report will be available later in October 2021.
2.55
In light of the considerable work already completed and also underway to progress these issues, the committee is of the view that it is not necessary to concurrently advance the bill. Accordingly, the bill is not supported.
2.56
The committee recommends that the Senate not pass the bill.
Senator Andrew Bragg
Chair