The Financial Conduct Authority (FCA) has released a best practice guide for firms to do more to protect vulnerable consumers.
This comes as its research finds there could be over 24 million people in the UK that can fall into a ‘vulnerable’ category.
The guidance aims to provide a framework that allows all businesses to accurately assess whether they are treating vulnerable consumers fairly, ensuring consistency across the financial services sector.
Stephen Lowe, group communications director at Just Group, said: “We are pleased to see the regulator is pushing on with its vulnerability agenda and providing more detail about how it expects firms to meet their obligations.
“The coronavirus pandemic has brought many of the vulnerability issues the FCA is trying to tackle into sharp focus – health problems, bereavement, job loss, financial stress – and is a reminder how quickly people’s circumstances can change due to events outside their control.
“We know that most firms have embraced the vulnerability issue and are taking steps in the right direction, but some are more advanced than others.
“Embedding vulnerability is a challenge so the additional guidance and clarity provided by this latest consultation will be widely welcomed.”
Consultation
Alongside the guidance, the FCA has launched a consultation which will incorporate feedback from a range of bodies including consumer organisations, firms and trade bodies following the first phase of consultation in July 2019.
The FCA found many examples of good practice and firms thinking carefully about their customers; however, it is “also aware of cases where vulnerability is either not considered by firms or positively exploited for gain”.
The guidance is open for consultation until 30 September 2020.
Christopher Woolard, interim chief executive at the FCA, said: “Today’s guidance sets out what firms should do to ensure vulnerable consumers are being treated fairly.
“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.”
Research
Also, the FCA has published research on vulnerable consumers’ experiences of dealing with financial services firms.
The research, which includes 21 in-depth case studies of consumers displaying a range of indicators of vulnerability, highlights four key themes for firms:
- Recognising vulnerability and understanding customers’ needs;
- The value of sympathy;
- The importance of empowered and knowledgeable staff; and
- Meeting vulnerable consumers’ communication needs.
The watchdog also carried out a survey and found that just under half (46%) of UK adults (24.1 million people) display one or more characteristics that fall under the four drivers of vulnerability.
These are:
- Health – health conditions or illnesses that affect the ability to carry out day-to-day tasks;
- Life events – major life events such as bereavement, job loss or relationship breakdown;
- Resilience – low ability to withstand financial or emotional shocks; and
- Capability – low knowledge of financial matters or low confidence in managing money (financial capability). Low capability in other relevant areas such as literacy, or digital skills.
Astounding figures
Jane Goodland, corporate affairs director at Quilter, said: “The FCA’s Financial Lives survey presents, yet again, astounding figures. These sobering figures focus the mind, particularly when we see some groups are hit more than others; such as those who rent, are unemployed or are over 75.
“The pressure is on for companies, government and charities to tackle this financial vulnerability. And we also need to think about some of this vulnerability that is preventable.
“While life events and, to some extent, health challenges, are not within our control, we can do more to improve our financial resilience and capability, which the FCA identify as being key to financial stability.
“Financial education and wellbeing are vital to the success of our nation. As we enter another economically challenging period, we need to ensure the next generation is equipped with the financial skills to survive and thrive.”
