The Finance & Leasing Association (FLA), a trade association for the UK consumer credit, motor finance and asset finance sectors, has become the latest organisation to respond to the Financial Conduct Authority (FCA) consultation on vulnerable customers.

As is the case with other sectors, the FLA response calls on the FCA to clarify how a firm’s compliance or non-compliance with the guidance could leave them open to FCA enforcement action and/or having complaints upheld by the Financial Ombudsman Service. The regulator acknowledges that the proposed vulnerable customer guidance does not create any new rules, but it does appear to impose new requirements on firms, such as:

  • Vulnerable customers should receive outcomes that are at least as good as those experienced by non-vulnerable customers
  • There needs to be consistency across different firms and sectors of the industry so vulnerable customers receive fair treatment regardless of the product they are buying/considering buying, or the nature of the financial service they are accessing

The response document from the FLA says:

“The draft guidance carries some inconsistencies, which need clarification. For instance, it states that firms do not need to follow the draft guidance in order to achieve compliance with the Principles, but later states that the guidance may be relevant to an enforcement case. The FCA needs to be absolutely clear on their expectations regarding this point, as the implications for firms regarding enforcement could be extensive. Firms will have confidence in exercising their judgement when they are clear about their obligations and do not feel at risk of regulatory enforcement (as well as the risk of inconsistent treatment by FOS and CMCs).”

The Association then says work needs to be done to persuade customers to disclose their vulnerabilities at the start of a relationship with a firm. It cites the example of customers wishing to hide their vulnerabilities, fearing that otherwise their credit application would be declined.

The FLA also expresses concern over the possibility that the FCA might be expecting some firms to adopt practices and procedures that may be disproportionate to the size and resources of smaller firms, saying:

“In our experience, firms are already aware of their obligations under the Principles. There should not be substantial change to the fundamentals of the processes firms already have in place. Instead, effective vulnerability guidance will lead to useful enhancements in the treatment of vulnerable customers. Again, we stress that this enhanced practice needs to consider the differing levels of resource within firms and be considered proportionately.”

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