Calls for finance firms to protect vulnerable consumers

The Financial Conduct Authority (FCA) is calling for finance firms to do more to protect vulnerable consumers and ensure they are receiving positive outcomes

The regulator says more than 24m people display one or more potential characteristics of vulnerability – which include physical and mental health issues, recent life events such as bereavement, capability and financial resilience.

Over a million people received debt advice last year, many of whom may exhibit characteristics of vulnerability, while the current Covid-19 pandemic has increased financial stress for many.

The FCA said a consultation held in July last year, which included consumer organisations, firms and trade bodies, found many examples of good practice and firms thinking carefully about their customers and potential vulnerability.

However, the FCA is also aware of cases where vulnerability is either not considered by firms or positively exploited for gain.

Now it has issued draft guidance which aims to provide a framework that allows all firms to accurately assess whether they are treating vulnerable consumers fairly, ensuring consistency across the financial services sector.

Alongside the draft guidance the FCA has also published research, including 21 in-depth case studies, on vulnerable consumers’ experiences of dealing with financial services firms.

The regulator says this highlights four key themes for firms. These are recognising vulnerability and understanding customers’ needs; the value of sympathy; the importance of empowered and knowledgeable staff; and meeting vulnerable consumers’ communication needs.

Christopher Woolard, interim chief executive at the FCA, said: ‘We know many more customers will be struggling with their finances as a result of the impact of coronavirus. Supporting vulnerable consumers is a key focus for the FCA, and the coronavirus crisis has only highlighted its importance.

'While many firms do excellent work to support their vulnerable customers, we will not hesitate to step in where others do not.'

The guidance is open for consultation until 30 September.

Kareline Daguer, director at PwC UK, said: 'In the current environment, firms should take the tone and sense of urgency in this guidance seriously and reflect on what they have done and what they should be doing over the next few months to deliver fair outcomes.

'With a backdrop of potentially increased unemployment and mental and physical health issues, firms will need to ensure their culture, processes and controls can meet the needs of their vulnerable customers and regulatory expectations.'

Guidance for firms on the fair treatment of vulnerable customers

Financial Lives: experiences of vulnerable consumers

Financial Lives: The experiences of vulnerable consumers – Case Studies

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