Whilst not proposing any new rules at this stage, the Financial Conduct Authority (FCA) is consulting on proposed guidance regarding treatment of vulnerable customers. The consultation paper gives some examples of good practice the FCA has seen from firms in this area.
Firms should consider whether there is anything they can do to identify the likely vulnerabilities amongst their customer base. For example, they may be able to obtain data showing how many customers fall into the younger or older age groups, or how many have income below a certain level. Examining the complaints the firm receives to identify where vulnerabilities may have been overlooked is another option.
A vulnerable customer may be more likely to enter into an unsuitable financial commitment. For example, this means that a customer may seek to take out a loan when it is not appropriate for them, so it becomes vital that the lender carries out a rigorous assessment of the customer’s circumstances before approving the application.
Lenders will ask about a customer’s income and will assess their credit record before approving a loan, but it may also be appropriate to ask whether the declared income is guaranteed, or whether they are on a zero-hours contract or receive much of their income from non-guaranteed overtime and/or bonuses.
The proposed guidance asks firms to consider whether it may be appropriate to signpost a customer to suitable support services. As an example, some lenders and credit brokers have a policy of making customers aware of support organisations such as the Money and Pensions Service whenever:
• A loan application is declined
• The stated purpose of the loan is debt consolidation
• There is evidence of recent missed payments or defaults
Many firms have a sales process that is completed online and need to be conscious of the need to provide detailed guidance to their less tech-savvy customers regarding the steps they need to take. In this case, it may also be appropriate to read out key information to the customer rather than simply directing them to online information.
Other vulnerable customers may need extra time to consider whether a product is appropriate for them.
Keeping appropriate records is vital when handling vulnerable customers. A customer might disclose a vulnerability to one member of staff, but will later deal with a different staff member, and may get frustrated if they have to explain their circumstances again. On becoming aware of a possible vulnerability, the staff member should ask the customer’s permission to record the information, whilst explaining that having the information on file could allow the firm to assist them in future.
Vulnerable customers may be uncomfortable with one particular method of communication, for example they may not feel confident speaking on the phone or may lack the written skills to compose a letter or email, so ideally firms should offer a range of ways in which customers can contact them.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article