The Financial Conduct Authority (FCA) has set out new best practice guidance for firms to do more to protect vulnerable consumers.

The second consultation is its revised guidance for firms on the fair treatment of customers in vulnerable circumstances, alongside new research on the experiences of vulnerable consumers.

More than 24 million 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.

The FCA says firms should do more to ensure that vulnerable consumers are receiving positive outcomes. The consultation incorporates 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 and potential vulnerability. However, the FCA is also aware of cases where vulnerability is either not considered by firms or positively exploited for gain.

The guidance 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Alongside the draft guidance the FCA has also published research on vulnerable consumers’ experiences of dealing with financial services firms.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
  • Meeting vulnerable consumers’ communication needs

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.”

The guidance is open for consultation until 30th September 2020.

Commenting on the guidance, Chris Fitch, Vulnerability Lead Consultant for the Money Advice Trust, said “This revised guidance makes clear that vulnerability remains at the very top of the FCA’s agenda, where it should be.  At a time when millions of peoples’ situations have been turned upside down by the impact of coronavirus, the FCA is right to challenge firms on what more they need to do to support vulnerable customers.”

“We welcome the ‘common harms’ that the FCA has now set out, which should encourage firms to think beyond single issues and circumstances, and encompass the complexity of people’s real lives.  This is also the first time the regulator has attempted to quantify the costs of responding to vulnerable customers, while balancing this with the benefits this can bring to firms and consumers alike.”

“Much of what the FCA has outlined today needs addressing now – there is no time to lose.  Fortunately, the financial services industry’s swift response to Covid-19 in recent months has shown that change can happen quickly when it needs to.  We look forward to working with firms

Eric Leenders, Managing Director of Personal Finance at UK Finance, said “This draft guidance will provide a practical framework to help identify vulnerable customers and ensure they receive the best possible support.”

“The banking and finance industry has put in place a clear plan to help customers whose finances have been impacted by coronavirus, in particular those in vulnerable circumstances. This includes payment deferrals on mortgages and consumer credit products, providing support through dedicated telephone helplines and helping those shielding to access cash and pay in a way that suits them.”

“The industry’s response to this pandemic has already been shaped by the FCA’s initial consultation on vulnerable customers and we look forward to working with the regulator to build on this as the guidance is finalised.”

StepChange Debt Charity Head of Policy Peter Tutton said “The FCA’s timely draft guidance is a welcome step towards ensuring people are not left worse off because products and services don’t take account of their needs or exploit their situation. The guidance reflects our own research, which has consistently revealed how inadequate existing safety nets are for people who experience vulnerability and life shocks. We wholeheartedly agree with the assessment that coronavirus will have increased the number of vulnerable customers –  which makes it more vital than ever to ensure that there is a firm focus on their needs.”

“Now the challenge is for the Government to consider how to step up support for financially vulnerable households where there is not a regulator like the FCA looking out for fair play. For the most vulnerable in our society currently struggling with rent, council tax or bailiff enforcement, the months ahead are filled with uncertainty – the Government must ensure the safety nets are in place to help them.”