The Financial Conduct Authority (FCA) has published its ‘Approach to Consumers’ paper. The regulator says that this document “explores our approach to regulating for retail consumers”, explains “what good looks like for all retail consumers”, and sets out “how we will work to diagnose and remedy actual and potential harm.”

In the foreword to the document, FCA chief executive Andrew Bailey comments:

“Markets can only work well if consumers are treated fairly. The financial products and services consumers need should also be available, marketed and sold in a way that allows them to make informed choices.”

The five key outcomes the FCA wants to see are:

  • Consumers can buy the products and services they need because the market in which they are sold is clear, fair and not misleading
  • High-quality, good value products and services that meet consumers’ needs
  • Everyone can access the financial products they need
  • The needs of vulnerable consumers are considered
  • Consumers are appropriately protected from harm

Whilst the paper acknowledges that consumers should take some responsibility for their financial decisions, the FCA warns that how much responsibility they should take depends on the circumstances. Specifically regarding financial advice, it says that “a consumer who has taken regulated advice should be able to rely on it being appropriate.”

The FCA also warns firms to treat vulnerable customers fairly. It notes that “any consumer can become vulnerable at any time in their life”, and that it “[expects] firms to pay attention to possible indicators of vulnerability and have policies in place to deal with consumers who may be at greater risk of harm.”

Later in the document, there is a very stark warning indeed, concerning firms’ treatment of vulnerable customers. The FCA comments that:

“We will take any deliberate exploitation of vulnerable or excluded consumers very seriously. Our response will include using the toughest enforcement action open to us.”

The FCA defines a vulnerable consumer as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”

Customers may be ‘vulnerable’ due to any number of factors, which include:

  • Financial difficulties
  • Lack of experience of financial products and services
  • Learning difficulties
  • Mental or physical health issues
  • English not being their first language
  • Poor spoken and/or written communication skills in general
  • Poor literacy and/or numeracy
  • A major lifestyle change caused by bereavement, divorce or unemployment

In some sectors, the very fact that an individual is doing business with the firm may well be an indicator that they are vulnerable. For example, a consumer is unlikely to be dealing with a debt manager unless they are in financial difficulties.

Aside from the issue of consumer vulnerability, developing trends that the FCA says will affect its approach to consumers include:

  • Increasing numbers of people who are experiencing severe debt problems
  • The ageing population
  • The increased use of technology in delivering financial services
  • The fact that many consumers are not seeking professional financial advice, even when facing important life choices such as considering how to access their retirement savings

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.