“Vulnerable customers are from all backgrounds, in every society and every walk of life; but they may not always be who you think they are!” Those working in the financial services and consumer credit industries will have undoubtedly heard the term ‘Vulnerable Customers’. It has become a common regulatory and workplace reference for a customer who may need additional assistance, advice and/or support when using, buying or signing up to consumer products and services.

The Financial Conduct Authority (FCA) has made it clear that regulated firms must have a defined and robust approach for dealing with vulnerable customers and have provided informative guidance in the form of Occasional Paper No.8. This paper gives firms suggestions and tools for developing and implementing an effective vulnerable customer program.

This article expands on the FCA’s existing guidance and utilises my own knowledge and understanding in this area, along with research, opinions and materials that offer advice for a compliant and adequate vulnerable customer approach.

How Important is Awareness?

The latest FCA Business Plan (2017/18) contains the word ‘vulnerable’ 40 times, with specific focus being noted in sectors such as mortgage lending, high-cost credit and overdrafts. The FCA advise, “there is an even stronger emphasis on consumer vulnerability and access to financial services. This priority runs across financial sectors, is an important part of our Mission and will also be a key focus of our forthcoming ‘Consumer Approach’ document.”

Understanding types of vulnerability, what makes a person vulnerable and how they can be identified, assessed and helped is an essential requirement that not only ensures compliance, but also builds consumer trust in a company’s brand, product and abilities.

A vulnerability is not an instantly closed door and should not be something that employees are afraid to handle. With the right information, training and tools, employees should understand what to look for, how to respond and what parameters are in place for proceeding.

Many people can be vulnerable and still need financial products or services (i.e. car insurance, mortgages etc).

Vulnerable Customer Definitions

Defining what makes a customer vulnerable is pivotal if businesses and their employees are going to identify and prepare accordingly. The FCA define a vulnerable consumer as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.”

At Know Your Compliance, we have used personal experience, research, opinions and existing materials to take this definition further and develop two statements that provide more detail on what makes a vulnerable customer: –

“Customers who are unable, for whatever reason, to make an informed decision at the time of dealing with them – this category includes those with language barriers, hearing & sight difficulties, mental health issues, bereavement, learning difficulties or the elderly. These customers may struggle to make a decision on whether the service or product you are offering is required or in their best interests or may not be able to utilise all of their senses in making a decision.”

“Customers whose welfare (financial, mental, emotional or physical) could be put at risk or detriment by choosing a service or product that you offer – this could be financially, with over-lending or high repayments; mental, through added stress, anxiety or being overwhelmed; or emotionally, through depression, grief or mental/physical illness.”

REMEMBER: Not only do businesses have a duty of care to ensure that they do not cause any undue or additional stress; they must also understand that some customers may not even be aware that they are vulnerable or will fail to disclose such information. This is where knowledge, listening and awareness are paramount!

Types of Vulnerability

A variety of vulnerabilities have already been detailed in the FCA’s guidance, as well as in other advice documents and most firms and their employees can recite the main types. However, the fluid nature of vulnerabilities is why some firms struggle to implement an effective compliance program in this area. It is common for the standard vulnerabilities to be focused on and prepared for, but it is those that are not considered that can cause the most harm.

Elderly customers, those with hearing difficulties or who are deaf, partially sighted or blind, those with disabilities, financial difficulties – these are the common responses from employees when asked who vulnerable customers are. There is also the generic reference to ‘mental health’, the scope and scale of which is hard to prepare for.

Not all customers are permanently vulnerable and not all vulnerabilities are visible or audible. Preparation is not about having a role-played scenario for every circumstance or situation – it is about knowledge, understanding, information and most of all LISTENING.

Identifying Vulnerable Customers

Being able to identify a vulnerable customer is essential, but so is approaching all customers with an open mind and reading between the lines. Many financial service sectors involve repetitive roles that foster complacency. Selling insurance, collecting debts, lending, mortgages – many of these roles come with scripts to help employees stay compliant and remember the selling/talking points.

However, such roles and scripting can cause tunnel vision, with an employee pressing on through the ‘must-say’ points until they have reached the end, sold the product or set up the agreement.  Many customers will not divulge that they are vulnerable, so listening (and watching where face-to-face) is imperative. This necessitates knowing what to look and listen for and noticing the signals that could indicate a potential vulnerability.

Verbal Indicators – If staff are dealing with customers on the phone or face to face, there are often signs of vulnerabilities. These can include difficulty in hearing or asking to repeat questions or information; displaying a lack of understanding or confusion; language barriers; long pauses or delays in answering; mentioning a vulnerability (e.g. recent bereavement or physical illness); showing signs of indecisiveness; fidgeting or lack of concentration (where customer is present).

Written Indicators – When corresponding with customers by letter or email, vulnerabilities are not as clearly identified as verbal or physical ones. Be on the lookout for language issues through multiple grammatical errors, spelling or general format of text; multiple questions or showing misunderstanding of areas already explained; mentioning in writing a vulnerability; confusion over what has previously been offered or discussed.

It can never be said enough that LISTENING is the key to identifying and understanding many vulnerabilities. Those in grief may become overly emotional or be easily distracted; from personal experience, many with mental health issues such as depression or anxiety don’t want to talk to anyone, but may still need to renew insurance or set up payment plans. Noticing how a customer speaks as well as what they say, can go a long way towards serving them better.

If employees listen – they will hear what is said between the ‘shop talk’; but only if they are taught to do so!

Developing Your Vulnerable Customer Approach

A vulnerable customer approach is multi-faceted and multi-tiered. A vulnerable customer policy enables a firm to set out its intent, objectives and obligations, as well as providing a supporting document for employees, agents and associated third-parties. Whilst it may not be feasible to define every vulnerability and situation; it is possible to promote an ethos and environment of listening and understanding and to remain flexible and approachable to both staff and customers.

Procedures must be documented, assessed and tested. Unspoken guidance or rules do not work well in business and fall short of the FCA’s expectation in this key area. The how, what, why and when must be defined and then continuously reviewed to ensure accuracy, adequacy, compliance and effectiveness. Vulnerabilities are fluid, situations change and nothing in business is a fixed constant.

Systems and automations are commonplace in today’s businesses, but never underestimate the human perspective and understanding. A vulnerability is not a piece of code or something that can be automated – it requires human intervention, a human approach and very often an emotion that only a human is capable of – Empathy!

A complete approach that covers every angle and reviews every facet is the only way to prepare and develop a program that works and is compliant. A policy on its own or individual training workshops are just pieces in a much larger jigsaw – the picture is never complete until all the pieces fit together.

An effective vulnerable customer program encompasses opinions and feedback from every level of an organisation and those developing the procedures cannot do so without the valuable input of the people doing the job. Measures, controls and tools for identifying, assessing, handling and monitoring vulnerable customers should include: –

  • Research and Feedback
  • Audit Checklists
  • Policy & Procedure Documents
  • Role Specific Staff Reminders, Aids & Scripts (sales, advice, customer care, complaints etc)
  • Clear Reporting Lines
  • Support Materials (e.g. braille, large print, audio options, touch phone, key facts document etc)
  • Dedicated Training Program
  • Employee Assessments & Evaluation
  • Audit & Monitoring Programs
  • Corrective Action Plans
  • Ongoing Reviews & Revisions
  • Multiple Customer Communication Methods (i.e. phone, email, website, in writing (inc braille, large print), Skype, face-2-face etc)

View the Vulnerable Customers Infographic

Catherine Roberts, Owner, Know Your Compliance