The Financial Conduct Authority (FCA) has published final guidance clarifying its expectations of firms on the fair treatment of vulnerable customers. The guidance aims to drive improvements in the way firms treat vulnerable consumers so that they are consistently able to achieve outcomes that are as good as everybody else.

People can find themselves in vulnerable circumstances at any time. The FCA’s recent Financial Lives research shows that 27.7 million adults in the UK now have characteristics of vulnerability such as poor health, experiencing negative life events, low financial resilience or low capability. Not all people with these characteristics will suffer harm, but they may limit people’s ability to make reasonable decisions or put them at greater risk of mis-selling.

Firms should understand what harms their customers are likely to be vulnerable to and ensure that customers in vulnerable circumstances can receive the same fair treatment and outcomes as other customers. This needs to happen through the whole customer journey from product design through to customer engagement and communications.

Nisha Arora, Director of Consumer & Retail Policy said “Protecting vulnerable consumers remains a key focus for us and given the impact of the Coronavirus pandemic, it is more important than ever that firms get this right. The guidance being announced today will help ensure vulnerable consumers are treated fairly and achieve outcomes as good as other consumers.”

“While some firms have made significant progress, we want to see all firms across sectors taking steps to understand and respond to the needs of their customers, particularly those who are most vulnerable to harm.”

“We also remind customers to tell your providers if you have specific needs – whether that’s due to ill health making it difficult to access a service, or a recent emotional or financial shock that is impacting your finances. Doing this will help firms support you.”

Using the guidance the FCA will continue to hold firms to account for their treatment of vulnerable customers. Firms can expect to be asked to demonstrate how their business model, the actions they have taken and their culture ensure the fair treatment of all customers, including vulnerable customers.

Firms are reminded that in treating customers fairly, they should also be aware of their obligations under the Equality Act 2010. It is likely that a breach of the Equality Act, for example failure to provide reasonable adjustments for disabled people, will also be a breach of the FCA’s rules.

The FCA has also today published a Memorandum of Understanding (MoU) with the Equality and Human Rights Commission (EHRC). This MoU sets out how the FCA will co-operate and work with the EHRC on equalities issues, to help protect people in financial services markets. Sharing information and expertise will help the EHRC and the FCA to act on equalities issues that arise.

This MOU will also support the FCA’s efforts as it seeks to eliminate discrimination and advance equality of opportunity in line with its obligations under the Public Sector Equality duty.

Joanna Elson CBE, Chief Executive of the Money Advice Trust, said “The FCA’s finalised vulnerability guidance published today is a powerful call to action for financial services firms to further improve their work on vulnerability – and comes at a time when millions of people are facing difficulty as a result of the pandemic.”

“Financial services have and will continue to play an important role in supporting people through this crisis. This new guidance, however, provides a crucial steer for firms on what steps they need to take now to ensure their support reflects the complexities of peoples’ real lives.”

“While we have seen much progress already from firms in recent years through our training work, it is crucial that firms further build on this. We look forward to working with firms to bring the FCA’s expectations into reality for their customers.”

Chris Fitch, Vulnerability Lead Consultant for the Money Advice Trust, said “Today’s guidance represents the end of a policy process that the FCA first began in 2015 but marks the start of a practical challenge for firms to now deliver the customer outcomes required.’

“The FCA rightly highlights the progress made by firms on vulnerability.  Firms, however, should not see this as an ‘end game’.  Instead, today’s guidance is a plan of action to be practically implemented.  In doing this, firms need to identify vulnerability where it exists, encourage more customer disclosure of support needs, and design accessible, useable, and inclusive products that benefit everyone.

“Firms should also think beyond single-issue causes of vulnerability, and focus on the common harms that different customer groups will face – only this can benefit the greatest number of consumers.”

“Given the vulnerabilities that existed prior to Covid-19, and those that have emerged since, this challenge is pressing.  The new guidance from the FCA will help firms to go further to ensure all customers are being treated fairly, regardless of their circumstances.  We look forward to working with firms to help achieve this, and to monitor and evaluate the overall impact of the guidance.”

Peter Tutton, Head of Policy at StepChange said “We strongly support the FCA’s focus on increasing its expectations of firms to ensure they treat vulnerable customers fairly, and give more bespoke attention to the individual protections that they need. Among households experiencing problem debt, vulnerability is common. Among StepChange clients in 2020, 50% were in a vulnerable situation – up from 44% in 2019. This demonstrates that vulnerability is far from a niche issue, and suggests that people in vulnerable situations are particularly at risk of debt.”

“To counter this, it is vital that financial services work for everyone. They must not exploit people in vulnerable situations upfront, nor treat them without due care if they experience vulnerability after taking out a financial product. The guidance is welcome but has limited statutory bite to protect vulnerable consumers. We would like to see a duty of care embedded in the legislative framework, that would prevent firms from exploiting consumer vulnerabilities, behavioural biases or constrained choices, along with more stringent monitoring and enforcement to ensure firms really put the guidance into practice.”

Conor D’Arcy, Head of Research and Policy at the Money and Mental Health Policy Institute, said “The FCA has today sent out a clear signal that financial firms need to step up the support they offer to vulnerable customers. With millions currently facing debt problems and distress due to the pandemic, there’s no time for banks to waste — we need action now to ensure everyone can access the financial services we all rely upon.”

“In particular, firms should act urgently to make their communications more understandable and supportive for vulnerable customers, and to ensure that their needs are a top priority when designing products and services. That would make a huge difference to the many people with mental health problems who struggle to make telephone calls, open post or navigate complex online forms — and who are effectively locked out of financial services as a result.”

“The FCA has set out the changes firms should make — now it’s time for firms to act, to ensure their services are inclusive for the millions of people struggling with poor mental health during the pandemic.”

James Fearnley, Policy and Propositions Manager at the Money and Pensions Service said “We know that Covid-19 has deepened existing vulnerabilities for some and exposed others to financial difficulty for the first time. We welcome the timely publication of this guidance, which will help firms provide appropriate support for customers in vulnerable circumstances.”

“This aligns with our recommendations on building the UK’s financial wellbeing in light of Covid-19, which highlighted the importance of firms taking a strategic approach to customer vulnerability: such as training frontline staff on spotting signs of vulnerability, involving vulnerable customers in the design of products that meet their needs, and linking them with third-party support services where needed, to ensure people get the right support at the right time.”

Dave Harris, Chief Executive at more2life said “Working with older customers, equity release advisers are acutely aware of how important it is to provide the right support to vulnerable customers. We welcome today’s guidance from the Financial Conduct Authority as it further cements the need to ensure that advice is tailored, appropriate and designed to help vulnerable customers make the right choices for their individual circumstances.”

“With this latest guidance, firms now have a clearer understanding of the FCA’s roadmap to achieving good outcomes for vulnerable customers. While only a third of people admit to feeling vulnerable when making a financial decision, 74% would welcome additional support from their adviser if they felt that they may be potentially vulnerable.  These conversations are not always easy but the FCA’s report highlights just how important it is to have them.”

“With more advisers identifying vulnerabilities amongst their customer base, the vast majority are keen to understand more about how they can do this and are looking to lenders for support.  We need to step up to the plate and provide them with the education, information and support that they need.”

Andrew Tully, Technical Director at Canada Life said “The issue of helping vulnerable clients is not new, but it has become particularly prevalent in the wake of the pension freedoms where more people still have money invested later in life, or risk becoming a victim of scams. In addition, Covid-19 has exacerbated the challenges for many vulnerable people, while many others have found themselves newly vulnerable due to the pandemic.”

“A key strand of the FCA’s new rules is the introduction of a ‘spectrum of risk’. This avoids the stark categorising of people as vulnerable, potentially vulnerable or not vulnerable, recognising that most people could be vulnerable at some point through their life and their position will likely vary over time.”

“Those who are financially vulnerable can be a key target of scammers, and unfortunately the pandemic has provided perfect camouflage for the scammers to increase their activity as they prey on the elderly, vulnerable and financially stretched. The impact of scams is not just a financial hit, the hidden costs to mental health can be severe as victim’s ability to trust is shattered overnight. Despite the public message campaigns and the ban on cold-calling, the scammers are either simply ignoring the law or looking to sophisticated campaigns over social media in order to con people out of their savings. We all need to be on our guard and also look out for other family members. The rapid rise of scams just shows we all need to be vigilant, scam aware and follow the simple rule of thumb – if it appears too good to be true, it inevitably is. Simply walk away, hang up, or delete the email or text.”

Helen Lord, Director at VRS said “The Vulnerability Registration Service welcomes the FCA’s ‘Guidance for firms on the fair treatment of vulnerable customers’ especially as it strongly emphases the need for firms to place the treatment of vulnerable customers high on their agenda. However, it is important to note that putting the onus on customers to tell providers of their vulnerability or changing circumstances can be very time consuming and distressing for the individuals involved.”

“We urge firms to look to existing tools to identify where a vulnerability exists to help to reduce debt, financial problems and harm. With 27.7 million adults in the UK with characteristics of vulnerability such as poor health, low financial resilience or recent negative life events, now is the time for firms to take proactive action so they can better identify vulnerable customers and put in place the most appropriate processes and support.”