The Financial Conduct Authority (FCA) appears to be mentioning the issue of treating vulnerable customers fairly more often than ever. The topic has been addressed in a number of speeches by FCA senior management and in late July 2019 the regulator consulted on proposed new guidance in this area.
Price caps on payday loans and rent-to-own agreements are examples of the high-level actions the FCA has taken to protect vulnerable consumers. However, the main responsibility for ensuring vulnerable individuals are treated well falls on individual firms.
In early September 2019, the Money Advice Trust held a webinar on what the FCA’s proposed new guidance means for firms. The panel included representatives of banking trade association UK Finance and representatives of Capital One and Newcastle Building Society.
Tim Hawley of Capital One suggested the guidance was quite high-level but that the issues mentioned by the FCA in the paper should prompt firms to conduct a detailed review of their existing vulnerable customer procedures. He suggested that the FCA and firms were still on a ‘journey’ and that the regulator might issue further guidance in the future.
The Newcastle Building Society representative Suzanne Wood said that it may not be possible for the FCA to write prescriptive rules in this area, but that she would recommend that firms read the guidance in detail and follow some of the examples of good practice in the paper. However, UK Finance representative Fiona Turner said many of the examples of good and bad practice in the paper were quite extreme examples.
Mr Hawley urged firms to ‘do the right thing’ for their vulnerable customers, even where there was no specific FCA rule to follow. This ties in with comments several FCA speakers have made about the culture within firms.
Ms Turner reminded firms of the FCA statistic that 50% of customers are potentially vulnerable. She then said there was a challenge for firms as vulnerable customers could fall into any of these categories:
- Permanently vulnerable, e.g. someone who has a long-term medical condition
- Temporarily vulnerable, e.g. someone who has lost their job or experiences other short-term financial problems
- Intermittently vulnerable, i.e. they would be vulnerable at certain times of their relationship with the firm and that they might move in and out of vulnerable status more than once
Webinar chairman Chris Fitch of the Money Advice Trust drew firms’ attention to the FCA’s statement that the eventual outcomes for vulnerable customers should be at least as fair as those experienced by non-vulnerable customers. Ms Wood said that a good rule to follow when measuring outcomes is ‘would you be happy if one of your elderly relatives received the same treatment?’
Ms Wood urged firms to highlight to customers the benefits of disclosing their vulnerabilities – if a customer consents to information about their vulnerability being retained on a firm’s systems then the firm can explain how that information will be used to help them in future.
Mr Hawley had some strong words for any smaller firm that believed it couldn’t afford to put in place vulnerable customer procedures. He said the costs of doing this were much lower than the costs of not doing it.
Responses to the FCA’s consultation can be submitted until October 4.
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