The FCA has set out new best practice guidance for firms to do more to protect vulnerable consumers. There’s some comment from Huntswood below too.
More than 24 million people display one or more potential characteristics of vulnerability – which include physical and mental health issues, recent life events such as bereavement, capability and financial resilience. Over a million people received debt advice last year.
The FCA says firms should do more to ensure that vulnerable consumers are receiving positive outcomes.
The FCA found many examples of good practice and firms thinking carefully about their customers and potential vulnerability. However, the FCA is also aware of cases where vulnerability is either not considered by firms or positively exploited for gain.
The guidance aims to provide a framework that allows all firms to accurately assess whether they are treating vulnerable consumers fairly, ensuring consistency across the financial services sector.
Alongside the draft guidance the FCA has also published research on vulnerable consumers’ experiences of dealing with financial services firms.
The research, which includes 21 in-depth case studies of consumers displaying a range of indicators of vulnerability, highlights four key themes for firms:
- Recognising vulnerability and understanding customers’ needs
- The value of sympathy
- The importance of empowered and knowledgeable staff
- Meeting vulnerable consumers’ communication needs
Christopher Woolard, interim Chief Executive at the FCA, said:
‘Today’s guidance sets out what firms should do to ensure vulnerable consumers are being treated fairly. We know many more customers will be struggling with their finances as a result of the impact of coronavirus. Supporting vulnerable consumers is a key focus for the FCA, and the coronavirus crisis has only highlighted its importance.
‘While many firms do excellent work to support their vulnerable customers, we will not hesitate to step in where others do not.’
The guidance is open for consultation until 30 September 2020.
Paul Dyer, Head of Regulatory Risk and Assurance at Huntswood, commented:
“This guidance couldn’t be better timed, given the fast-changing conditions that are exacerbating the financial challenges of consumers. This is clearly a high priority for the regulator.
“The difficulty with vulnerability is that it is a fluid concept, with a variety of causes that can change rapidly. These guidelines will provide some key insights into how firms should be adopting more proactive measures in their identification and fair treatment of those consumers experiencing vulnerability, some for the first time.
“The Financial Lives research provides a welcome reminder that call handlers require excellent communications skills to recognise the signs of vulnerability and to be sympathetic to customers’ needs. This is particularly important at times of crisis when call centres might be under pressure from high volumes of calls.
“Joining up data points across channels can provide firms with a more holistic view of each customer, allowing for improved identification of vulnerability and better outcomes for those experiencing it.”