Customer vulnerability and collection: securing fair outcomes for all

16th September 2021

Although securing fair outcomes for vulnerable customers has long been a concern both the FCA’s and Ofcom, it has taken a global pandemic to really place it on the agenda of most unregulated businesses which are customer-facing. This includes the debt collection and credit management industry, which although often touching customers when they are at their most vulnerable, surprisingly remains mostly outside of FCA regulation. 

FCA authorisation is only required to collect debt under credit agreements, consumer hire agreements and regulated peer-to-peer loans, therefore most inhouse and third-party collection teams have no formal requirement to develop and implement policies and procedures around customer vulnerability and the debt collection process.

FCA Finalised Guidance 

In February 2021 the FCA released its finalised guidance on the fair treatment of vulnerable customers. Whilst ensuring fair outcomes for vulnerable customers has been a key focus for the FCA since 2015, the FG21/1 Guidance makes clear that customer vulnerability should be considered across every part of the business, and that regulated firms will be held accountable to the standards set by the FCA Principles and Rules.  Whilst still only holding regulated companies to account, the guidelines clearly highlight how the principles are applicable to all businesses and, as with the FCA Treating Customers Fairly Principle, are highly likely to be become the accepted standard across all industries.

Moving from debt collection to debt resolution

Despite the lack of formal regulation there has been a gradual move towards more responsible debt collection strategies across most of the industry. This has been driven by the growing understanding that market share is just as likely to be won on customer experience than on product and price and improved understanding of how and why people get into debt. It is now widely accepted that most people do not accumulate unmanageable debt out of choice, and that when they do, they would far rather settle it if given the opportunity and means. This has led to a shift towards finding ways to help the consumer resolve their debt position rather than just collect on it.  

However, this shift in corporate priority will not address the needs of the most vulnerable and all businesses in 2021 have a social obligation and ask themselves tough questions about whether they are truly inclusive of all their consumers, or whether improvements could be made to ensure everyone can achieve a fair outcome. 

Are you meeting the needs of your vulnerable customers?

If your business does not have established policies and procedures in place regarding customer vulnerability, the answer is probably no. To ensure vulnerable customers’ needs are met a business must:

  1. Ensure their staff have the right skills to recognise and respond to the needs of their vulnerable customers
  2. Have adapted communication and customer service processes to ensure vulnerable customer needs are met.
  3. Establish a customer vulnerability policy and the procedures to ensure it is delivered across the business. 
  4. Develop processes to monitor and assess whether the business is successfully meeting and responding to the needs of customers with characteristics of vulnerability, and to make improvements where this is not happening

For businesses just starting to develop their customer vulnerability strategy, this can seem overwhelming, and it can be difficult to know where to begin. If you are looking to establish a customer vulnerability policy and need some support the FCA Finalised Guidance provides a clear overview of the actions firms should take to understand the needs of vulnerable customers to make sure they are treated fairly. Or download the Barratt Smith Brown Customer Vulnerability and Debt Collection eBook. This outlines 7 steps a business needs to take to ensure that vulnerable customers are identified and then effectively supported through the debt collection process. These are by no means exhaustive but will provide a framework to help your business move to a customer centric model which ensures fair outcomes for all customers.

Ashley Barratt, CEO at Barratt Smith Brown