FCA publishes guidance on treatment of vulnerable customers

“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" - the FCA's Christopher Woolard

Tom Ellis
23 July 2019

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Forty-one-page piece of guidance for businesses on how to treat vulnerable customers better

The guidance is split into a number of sections: understanding the needs of vulnerable customers, skills and capability of staff, product and service design, customer services, communications, and monitoring and evaluation.

Fundamentally, the FCA said it wanted to see firms doing the right thing for vulnerable consumers and have that embedded in their business culture.

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The main aim, the regulator said, was for firms to be more focused on ensuring outcomes for vulnerable customers were at least as good as those of other clients. It also wanted to see greater consistency across both firms and sectors so vulnerable customers were treated fairly no matter what financial service or product they were buying.

The FCA's guidance was based around five of its fundamental principles that relate most to the fair treatment of vulnerable customers, which are setout in the table below.

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Who are vulnerable customers?

For the purposes of its guidance, the regulator said a vulnerable customer is someone who "due to their personal circumstances is especially susceptible to detriment" and that its definition was intentionally broad.

It added: "Some consumers will be actually vulnerable because of their personal circumstances. Actual vulnerability can be permanent but is often transient because consumers' circumstances constantly change. This can cause consumers, who had not previously been vulnerable, to become so at some stage of their life."

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The FCA said examples of vulnerability could include health conditions or illnesses that affect the ability to carry out day-to-day tasks, the low ability to withstand financial or emotional shocks, major life events such as bereavement or relationship breakdown, and low knowledge of financial matters.

The guidance will be consulted on in two phases. The regulator is looking for comments on the first stage of the consultation by 4 October 2019.

FCA executive director of strategy and competition Christopher Woolard said: "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".

'Positive step'

EY's John Liver said many firms will need to upgrade their current approaches and review and monitor their effectiveness on an ongoing basis.

"The regulator recognises that the industry already has pockets of good practice but expects firms to build on this, in particular around proactively understanding the needs of vulnerable customers," he said. "There is no single best approach and firms will need to consider the most appropriate application of the guidance to their own customer base, products and channels.

"The FCA is rightly continuing a full dialogue with stakeholders to build the industry's cultural buy in. Overall, this consultation is a positive step in setting expectations on this important topic. Industry and other stakeholders will want to continue to engage with the regulator to embed and build on this further."