Regulator finds gaps in support for vulnerable customers

The Financial Conduct Authority (FCA) has identified significant gaps in how firms support vulnerable customers.

It was found that 44% of vulnerable customers reported negative experiences, compared to 33% of non-vulnerable customers. Three-quarters (74%) of vulnerable customers who told their firm about their circumstances said that staff asked the right questions to understand their situation, 57% felt their firm cared and 58% said their firm took action to provide support they needed.

FCA guidance introduced in 2021 and reinforced by the Consumer Duty in 2023 aims to ensure firms provide adequate support. However, many customers still face barriers to disclosure due to embarrassment or fear of being treated differently. The FCA’s review highlights both good practices and areas needing improvement, urging firms to enhance their training and communication strategies to better assist vulnerable clients.

Anyone can become vulnerable due to health, life events, ability to withstand financial or emotional shocks, or because of poor financial or digital literacy.

The research finds that vulnerable customers are more likely to report a negative experience with financial services firms, such as their bank or insurer, when compared to non-vulnerable customers.

Sarah Pritchard, Executive Director, Competition, Markets and International at the FCA said “It can be hard to tell your bank or insurer about your specific needs but those who ask for help tend to feel more supported. We’ve seen good examples where financial firms are making a difference for vulnerable customers, but we know that vulnerable people report more negative experiences than others.

“We want firms to build on the good work identified, to help people open up and make sure they get the support they may need.”

Peter Tutton, Head of Policy, Research and Public Affairs at StepChange, said “At StepChange, it’s very common for people struggling with debt to have additional vulnerabilities, in fact over half (55%) of new clients have a vulnerable characteristic in addition to their debt problem – so its worrying that so few vulnerable customers are disclosing their needs to their creditors.

“We know many people in vulnerable circumstances face barriers to support, such as fear and anxiety about the consequences of asking for help, not knowing what support is available and mental health problems that make it difficult to cope with their situation and take action.

“It’s encouraging that many customers who reach out for support have positive experiences and this research emphasises why the Consumer Duty is so important; it’s vital the FCA continues to raise expectations of firms to support customers in vulnerable situations.”

Chris Fitch, Vulnerability Lead at the Money Advice Trust, said “The FCA’s Review addresses the importance of consumer vulnerability disclosures. But the most significant findings are that the majority of firms were unable to monitor or take action on outcomes for vulnerable customers, and that most had not made significant progress on product and service design for vulnerability. It is notable, too, that nearly half of firms had not provided training to staff in non-frontline roles.

“These ‘firm-side factors’ may explain why the FCA’s new consumer research reveals vulnerable customers had poorer outcomes than non-vulnerable customers on almost every service experience measure used.”

Conor D’Arcy, Deputy Chief Executive of the Money and Mental Health Policy Institute, said “This review underlines that people in vulnerable circumstances still aren’t consistently getting the service and outcomes from financial services that other customers receive.

“It’s worrying that only a minority of customers in vulnerable circumstances have disclosed their needs to financial services providers, and our own research suggests that this proportion is particularly small for people with mental health problems. That means that an alarmingly high share of people who could really benefit from extra support are missing out – which can have big impacts on our finances and our mental health.

“This isn’t a new problem, and we know what the solutions are. Firms need to be more proactive in encouraging customers to share their needs and to take tangible action in response to disclosures. To really deliver that step up in outcomes for people in vulnerable circumstances, the FCA must be ready to step in decisively with firms that consistently fail to meet the expectations set out in the vulnerability guidance.”