Britain’s financial regulator has launched a scheme which it hopes will persuade all financial firms to treat vulnerable customers fairly in their dealings with them.
The Financial Conduct Authority (FCA) has published a series of guidelines and asked for industry feedback on its proposals by the beginning of October.
Lack of consistency
The watchdog claims it has found a lack of consistency across the financial services sector and ‘in some cases, firms are clearly failing to consider the needs of vulnerable consumers, leading to harm’.
It wants to see firms making consistent efforts to ensure vulnerable people are protected and applying the guidance to their own business practices.
Strategy and competition director Christopher Woolard says “Protecting vulnerable consumers is a key priority for the FCA and we want to see firms explicitly embedding the fair treatment of vulnerable consumers into their culture.
Where we find that firms are not doing enough to ensure that consumers are treated fairly, we will take action.
“Firms need to take particular care to ensure that vulnerable consumers are treated fairly as they may be more likely to experience harm. The guidance should drive improvements across the industry, improving outcomes for millions of vulnerable consumers.”
Half of UK adults
Quoting the Financial Lives Survey of 2017, the guidance document says: “Half of UK adults (25.6 million people) display one or more characteristics of being potentially vulnerable.
This means they may be more susceptible to becoming vulnerable than others.
“Some groups are more likely to be vulnerable than others, such as those under 24 or over 65, unemployed people, and those with no formal qualifications. Consumers will often display more than one characteristic of vulnerability.”
Research has revealed a whole series of potential harms the vulnerable might experience:
- Financial exclusion
- Difficulty in accessing services
- Disengagement with the market
- Exposure to mis-selling
- Inability to manage a product or service
- Purchasing inappropriate products or services
Summarising the guidance the document says firms should consider how vulnerabilities could affect the customer experience and customer outcomes. To understand the needs of vulnerable customers firms should:
- Ensure staff are able to understand a range of indicators of actual and potential vulnerability, and the needs that can arise from these vulnerabilities.
- Frontline staff should have the skills to engage with customers to seek relevant information to understand their vulnerability.
- Staff should recognise when the information the firm holds or obtains from customers indicates that the customer is vulnerable and warrants additional support.
Once responses have been gathered the FCA will revise the draft guidance before sending it out for consultation a second time.
No date has yet been given for the final version.