The Financial Conduct Authority has highlighted to firms that there are 24 million potentially vulnerable adults in the UK and calls on these firms to do more to help their vulnerable customers. The four key concepts the FCA wants firms to address are:
- Recognising vulnerability and understanding customers’ needs
- Recognising the value of sympathy
- Understanding the importance of empowered and knowledgeable staff
- Meeting vulnerable consumers’ communication needs
The FCA wants firms to be in no doubt that there are a great many vulnerable and potentially vulnerable customers in the marketplace, and that the effects of coronavirus will only increase both the number of vulnerable customers and the potential extent of their vulnerability.
The FCA says that the four main drivers of vulnerability are:
- Health – health conditions or illnesses can affect a person’s ability to carry out day-to-day tasks (6% of UK adults fall into this category)
- Life events – major life events such as bereavement, job loss or relationship breakdown can certainly make individuals vulnerable (20% of UK adults have experienced one of these events within the last 12 months)
- Resilience – some people will have a limited ability to withstand emotional or financial shocks (21% of UK adults fall into this category)
- Capability – certain consumers will have a limited knowledge of financial matters or low confidence in managing money. Others might lack literacy or digital skills (20% of adults)
Many consumers will exhibit more than one of these vulnerable characteristics.
The paper suggests that the vulnerabilities can lead to various personal and behavioural consequences that make financial management more difficult. These include:
- Increased stress levels
- Increased time pressures due to increased responsibilities
- Being pre-occupied with other issues
- Being unable to put things in perspective and make accurate comparisons
- Becoming more reckless or careless
On one hand, the paper highlights the responsibilities of senior management to ensure that the firm has a culture that promotes fair treatment of vulnerable customers, but it is also mentioned that staff at all levels have a role to play here. On this subject, the paper says:
“Senior leaders in firms should create and maintain a healthy culture in which all staff take responsibility for reducing the potential for harm to vulnerable consumers.”
The paper not only provides some guidance for firms, but also gives details of some actions the regulator has taken in the past when firms have failed to treat vulnerable customers fairly. These include:
- Action to stop a credit broker charging upfront fees when it failed to explain these fees transparently
- A fine for mis-selling of mobile phone insurance
- A fine for a bank over its treatment of customers in mortgage arrears
The FCA invites responses to the consultation until September 30 2020.
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 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