The Financial Conduct Authority (FCA) estimates that 27.7 million adults in the UK are in circumstances that could make them vulnerable. It has recently released updated guidance on supporting vulnerable customers. The aim of the guidance, which applies to all firms regulated by the FCA, is to ensure that vulnerable customers experience outcomes as good as other customers and are treated fairly and in a consistent manner.
Who can be vulnerable?
Before looking at the key points in the guidance, it is worth reminding ourselves what the FCA means by "vulnerable".
“Someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”
The FCA has identified four key drivers that can lead to customers becoming vulnerable:
- Health (Physical disability, severe or long-term illness, hearing or visual impairments, mental health condition or disability, addiction, or low mental capacity or cognitive disability)
- Life events (Retirement, bereavement, income shock, relationship breakdown, domestic abuse, and caring responsibilities)
- Resilience (Low or erratic income, over indebtedness, low savings, or low emotional resilience)
- Capability (Low knowledge or confidence in managing finances, poor literacy or numeracy skills, poor English language skills, learning difficulties, poor or non-existent digital skills, or no or low access to help or support)
When considering those factors, it's easy to see that anyone can find themselves in vulnerable circumstances at any time. One of the many impacts of the coronavirus pandemic is to show how quickly people's circumstances can change. Seemingly secure jobs can disappear; furlough payments, whilst a lifeline for many, still entail at least a 20% cut in income; and the challenges of isolation and home schooling have created or increased mental health pressures at home.
The FCA's guidance
The FCA's guidance contains six key expectations which are designed to ensure that all customers are treated fairly, regardless of their circumstances.
- Understanding customer needs. Firms must understand the needs of vulnerable customers in their target markets and customer base. The vulnerabilities of a pension provider's customer are likely to be different to the customer of a firm in the non-standard vehicle finance market. Firms can anticipate potential areas of concern by asking themselves "What will our customers become vulnerable to?".
- Skills and capability. Everyone has a part to play in ensuring the fair treatment of vulnerable customers. Frontline staff clearly need to be trained to identify warning signs when speaking to customers. But more widely, other parts of the business also need to be considered. Is the firm's boardroom culture supportive of vulnerable customers? Do web designers make it easy for those who aren't tech savvy to navigate around and find help? Is the message the customer receives clear and consistent at every "touch point"?
- Take practical action. Firms need to consider the needs of vulnerable customers in their product and service design, customer service, and communications. Do any of the features of a financial product or service exploit vulnerable customers? Is it overly complex and hard to understand so that customers cannot assess if it is suitable for their needs? Are customers signposted to appropriate help or services?
- Customer service. Firms' systems and process must support vulnerable customers to disclose their needs. Are your staff trained to spot signs of vulnerability? Do they know what support is available to customers?
- Communications. A failure to communicate with vulnerable customers in a way they can understand may result in an increased risk of harm. Is your communication understandable to customers in the target market? Do you offer multiple channels, including digital, so customers have a choice of how to make contact?
- Monitoring and evaluation. Firms should implement processes to evaluate and monitor whether the needs of vulnerable customers have been met. What quality assurance processes do you have in place? Do you produce and review relevant management information? Do you analyse complaints data? What are your customers saying about you on social media? Can staff provide feedback on your processes?
How can Brodies help?
Brodies has extensive knowledge and experience of developing and implementing cost effective consumer and commercial volume debt and asset recovery and litigation strategies that comply with the FCA's guidance. We can deliver training to your staff, review your products and processes, advise on documentation and correspondence, and assist with the implementation of monitoring processes.