Consumer credit use and debt problems from a problem-gambling perspective
Consumer credit is a useful financial tool for domestic purposes, such as acquisition of goods, mortgage, education, or health care. A particular situation of usage of loans or consumer credit is that associated with people experiencing problems with gambling. Gamblers may use consumer credit to continue gambling or cover previous losses. Research in problem gambling suggests that consumer credit use and debt problems are risk factors in problem gambling and increase with problem gambling severity.
In this article we will explore in brief the main findings of the research conducted between 2010 and 2020 regarding gambling-related consumer credit use and its relationships with gambling harms.
Financial harms and problem gambling
People experiencing gambling problems are a vulnerable population with respect to consumer credit and loan services.
Indeed, financial harms – lost savings, debt problems, and bankruptcy – are the most common harms reported by problem gamblers. Such harms are themselves the most striking consequence of problem gambling and have the potential to generate other secondary harms, including social, familial, and health-related harms. Borrowing money to resolve gambling-ralated financial problems is one of nine criteria of diagnosing for gambling disorder.
The statistical indicator called ‘house edge’ reflects for all the regulated gambling activities that persistent gamblers will invariably loose money over time. Yet mounting losses may motivate players to continue gambling in an attempt to “get even”, often driven by falalcious or irational beliefs and cognitions, which is a classical pattern leading to problem gambling.
In this problematic picture of gambling, access to credit can accelerate this process, by triggering intense gambling involvement and repeated borrowing as the gambler consumes their financial resources and becomes distressed by the implicit debt. As the problem worsen, the gambler’s financial situation appear for them to be contingent of winning, as well as potentially their relationships, employment, and housing. Therefore, non-financial second-phase harms may arise as a consequence of the financial harms.
On the other hand, psychological vulnerabilities, such as depression or anxiety, as well as pre-existing financial problems may be exacerbated by the debt-related problems. It is known that personal unsecured debt correlates strongly with mental health problems and in problem gambling such correlation is even more stronger.
Therefore, individuals who use consumer credit services to fund their gambling activity are at a high risk for experiencing mental health problems.
In several countries, instances of lenders, including big financial institutions, were found to offer high-limit credit services to customers who had disclosed gambling problems.
Research scope and review
Given the critical role that consumer credit use and indebtedness play in exacerbating the gambling-related harms, research in problem gambling has given utmost attention to these factors.
The findings of such research aim eventually to contribute to the prevention of the development of problem gambling via financial distress and to the governmental and legislation policies in regard to credit services for gamblers.
However, little empirical research has investigated the prevalence and patterns of gambling-related consumer credit use and its relationships with gambling-related harms.
Psychologists Thomas Swanton and Sally Gainsbury from University of Sydney provided a research review covering 86 journal articles published between 2010 and 2020, having as general topic gambling-related consumer credit use and debt problems, and their psychosocial correlates.
In what follows I will outline the key findings of the reviewed research, as presented by the two authors.
Prevalence and risk factors for gambling-related consumer credit use and debt problems
Research has shown that gamblers experiencing debt problems are most common among those who report gambling-related harms.
Pooled data from the UK Expenditure and Food Surveys showed a positive correlation between consumer credit use and gambling expenditure across household income levels and that those with consumer credit repayments had a 4-5% increased probability of spending money on gambling.
The UK Adult Psychiatric Morbidity Survey showed positive correlation for consumer credit use and debt problems with problem gambling severity. Twice as many at-risk gamblers borrowed money in the past year from pawnbrokers, money lenders, or family/friends to cover daily expenses (16.4%) as compared to non-problem gamblers (8%).
Similarly, debt problems increased across those with increasing levels of gambling harms (non-problem 7%, at-risk 12.7%, problem 33.1%).
A similar prevalence survey in the US found lower rates of debt problems affecting 14.8% of problem gamblers compared to 28.1% of disordered gamblers.
The prevalence of at-risk gamblers was significantly higher among customer credit counselling clients (9%), compared to the general population (1.8%).
All these results indicate that consumer credit use and debt problems are risk factors for increased problem gambling severity, independent of socioeconomic factors.
Type of gambling, gambling profile, and genre differences
Several studies have employed in their framework the differences between gamblers who play online and those who play in land-based casinos. The main factor differentiating the gambling patterns and potential for financial harms between the two forms of gambling is the use of the credit cards for gambling online transactions.
Online gamblers are more likely to report debt problems than land-based gamblers. This difference may be partlly explained by the wide range of payments methods available for online transactions. In addition, online gambling is associated with greater overall gambling involvement, which is hypotesized to contribute to greater debt problems.
A study found that female help-seeking problem gamblers were more likely to report using consumer credit services than men. Also females were more likely to have had difficulty paying bils, have gambling-related debt, and have experienced gambling-related bankrupcy.
The studies providing these results did not explain these differences, which remained unclear. Still, it is hypothesized that they could relate to lower economic independence, higher prevalence of anxiety and depression, and/or gambling being more commonly used as a coping mechanism among women.
Problem gamblers who self-qualify as professional gamblers have been found to be more likely to have gambling-related debt problems than problem amateur gamblers. Of course, some problem gamblers may incorectly self-qualify as professional gambling from various reasons, including gambling-specific cognitive distortions.
Psychosocial correlates of gambling-related debt problems
Being affected by a common mental disorder (like general anxiety or depression) is about seven times more likely for problem gamblers with debt problems than for non-problem gamblers with no debt problems. Problem gamblers with no debt problems are nearly four times as likely as unindebted non-problem gamblers, while non-problem gamblers with debt problems are about three times as likely as unindebted non-problem gamblers.
Such results may argue alone for the importance of the financial factor in the equation of problem-gambling harms and suggests that problem gambling and debt problems contribute partly to poor mental health outcomes, which are reached more likely when both are in effect.
Both qualitative and quantitative research have associated consumer credit use and debt problems with psychological distress. For instance, rates of depression are higher among disordered gamblers who declare bankrupcy as a consequence of gambling, compared to those without a history of bankrupcy. But distress may also develop as an effect of problem gambling, for example caused by worsening financial problems.
Gambling-related debt problems are associated with alcohol abuse and daily tobacco use, which may represent a coping mechanism and obviously have social impact.
Family members may experience a wide range of harms as result of gambling-related debt problems. Psyschological distress and family conflict are prevalent, probably due to the gambler concealing problems, which may undermine trust and reciprocity.
Gambling-related debt problems have been also found to be risk factors for involvement in illegal activity such as fraud, theft, or embezzlerment. A US study found that 57.3% of help-keeping problem gamblers reported a lifetime history of gambling-related illegal activity motivated as for paying off gambling debts or to fund continued gambling.
It worth noting that financial problems, including debt, are consistently reported as a primary motivation for gambling-related help seeking.
Conclusion
Debt problems are qualified as both a potential reinforcer and essential consequence of problem gambling. Although relatively little research focused on understanding the specific types and patterns of borrowing that may potentiate these problems, the research review has drawn two essential conclusions: First, consumer credit use and debt problems are risk factors for increased severity of problem gambling, largely independent of socioeconomic factors. Second, debt problems contribute not only to gambling problems, but also to poor psychosocial functioning.
Most of the reviewed studies suggested directly or indirectly that research collaborations with financial institutions may be beneficial in order to refine and revise consumer protection policies and to develop interventions for preventing financial-related gambling harms.
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