Research calls for greater regulation of prize draws claiming to donate to good causes

Concerns have been raised around debt problems caused through unregulated prize draws that offer the promise of a donation to charity to entice people to take part.

Research has found that £117m of credit card debt was accrued by consumers through unregulated prize draws and competitions over the last year.

It also found that “the promise of a charitable element” entices almost half (45%) of participants more likely to enter.

However, it remains to be seen how much is donated to good causes through competitions run by unregulated prize draws.

The research found that more than half (57%) of consumers have entered prize draws and competitions that claim to donate a proportion of their entry’s funds to charity “without checking how much actually goes to the cause”.

In contrast, between a fifth and half of gross ticket sales go to good causes via regulated society lotteries, adds the research by online lottery provider Jumbo Interactive.

The firm is calling for greater regulation for prize draw and competition market, especially around transparency around charity donations.

“A huge amount is being spent on credit cards on prize draws, pushing people into debt – despite the free entry option being the reason they are exempt from oversight,” said Jumbo Interactive UK general manager Nigel Atkinson.

“With so much money changing hands, the government needs to look at the proper regulation of prize draws and competitions to better protect consumers.

“For many, the fact that some of the cost of entering prize draws and competitions goes to charity is a big part of why they enter. But it remains easy for companies to bury information in the terms and conditions about how much actually goes to charity.

"Society lotteries on the other hand have minimum donation rates and help raise funds for a wide range of important causes, large and small.

“However, public trust is crucial for society lotteries to operate successfully, and increased regulation of the prize draw and competition market will offer that consistency and transparency.”