New FCA Guidance keeps vulnerability firmly on the agenda

Commentary | 01/03/21

In the last week, the Financial Conduct Authority (FCA) published its final guidance on the fair treatment of vulnerable customers. The treatment of vulnerable customers has been a key priority for the FCA, and it is an issue that has grown in prominence within financial services in recent years.

The regulator views vulnerability as a spectrum of risk, with the risk increasing if a customer has characteristics of vulnerability, such as health issues, the impact of significant life events, low ability to withstand financial or emotional shocks and/or low financial capability.

The guidance follows hot on the heels of the publication of the FCA’s latest Financial Lives Survey. The survey looks at attitudes to money, along with the interaction consumers have had with financial services firms. Findings from this survey show that nearly 28 million people in the UK now have one or more characteristics of vulnerability.

This means a large proportion of the UK population is at risk and the Covid-19 pandemic has only increased the numbers of individuals that might become susceptible to vulnerability, further pointing the spotlight at firms as to how to best help these consumers.

The aim of the guidance is to drive improvements in the treatment of vulnerable consumers, in the hope that they achieve outcomes that are as good other customers.
The FCA explains notes that:

“Characteristics of vulnerability may result in consumers having additional or different needs and may limit their ability or willingness to make decisions and choices or to represent their own interests. These consumers may be at greater risk of harm, particularly if things go wrong”.

The guidance is helpful as it outlines the regulator’s expectations of firms when dealing with vulnerable customers. Companies need to ensure they can recognise and address vulnerability at any point in a customer’s journey. They also need to be prepared to demonstrate how addressing vulnerability is at the heart of their business model.
Firms need to have considered their customer base, product design and the skills their staff require. And this needs to be kept under constant review.

As firms digest the new guidance, we will be discussing vulnerability, and the role of the upcoming statutory breathing space scheme with our members at our summit on 10th March. Look out for more detail about our work on vulnerability beyond this.