27May

Leading experts have given their views on how the issue of firms’ treatment of vulnerable customers has evolved over time.

Speaking to Credit Strategy magazine, Carl Packman, Head of Corporate Engagement at anti-poverty campaign group Fair By Design, suggested that Covid-19 had highlighted deficiencies in some firms’ systems for dealing with vulnerable customers. However, he was optimistic that firms would adapt to the current situation and design innovative products and services.

Alex Bannister, Head of Innovation at Nationwide Building Society, said that the ending of the furlough scheme, scheduled for September, could pose additional challenges for firms and how they handle their vulnerable customers. If the furlough scheme ends abruptly, there could be a rise in unemployment. 

Sonya Schofield, Vulnerability Consumer Lead at lender Gain Credit, stressed the importance of offering vulnerable customers the option of communicating via a variety of media. She said that her firm was now considering the interests of vulnerable customers when designing products, when considering marketing strategies and when deciding how to communicate with customers. She also highlighted how the pandemic has increased the number of consumers who were vulnerable due to mental health issues. 

Tim Hawley, Head of Customer Vulnerability at Capital One, said that recent events had provided firms with the additional challenge of having to support both vulnerable customers and potentially vulnerable employees. He stressed the importance of firms encouraging their vulnerable customers to engage with them – unless firms understand the needs of their vulnerable customers, they can’t assist them. He also highlighted how Covid-19 has increased the potential for consumers to become victims of ‘economic abuse’, where one party seeks to restrict the access enjoyed by another person, such as their partner, to money, food, clothing, transportation or housing.

The issue of customer vulnerability has perhaps never been more important. The most recent Financial Conduct Authority Vulnerable Lives survey showed that the Covid-19 pandemic has increased the number of vulnerable consumers, to the extent that the majority of UK adults are now potentially vulnerable.

The FCA definition of a vulnerable customer is:

“Someone who, due to their personal circumstances, is especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care.” 

The key drivers of vulnerability are considered to be:

  • Health – health conditions or illnesses that affect ability to carry out day-to-day tasks
  • Life events – life events such as bereavement, job loss or relationship breakdown
  • Resilience – low ability to withstand financial or emotional shocks
  • Capability – low knowledge of financial matters or low confidence in managing money, poor literacy, or limited digital skills

Sometimes, one vulnerability can lead to another, for example, a health condition can lead to a loss of employment, or a relationship breakdown can result in mental health issues.

The four key elements of a firm’s vulnerable customers’ strategy should be:

  • Understanding the needs of their target market and customer base, including the drivers of their vulnerability, the impact of this vulnerability and the effect this has on the outcomes they receive
  • Ensuring staff have the right skills and capability to recognise and respond to the needs of vulnerable customers
  • Responding to the needs of vulnerable customers via appropriate product design, flexible customer service provision and communications
  • Monitoring and assessing whether they are meeting and responding to the needs of vulnerable customers and making improvements where necessary

Senior management have an important role to play in creating a culture where staff are encouraged to treat vulnerable customers fairly.