The Financial Conduct Authority (FCA) has published its expectations of how firms should deal with almost 30 million vulnerable customers in the UK.
Recent research by the FCA found that 27.7 million UK adults now have characteristics of vulnerability such as poor health, experiencing negative life events, low financial resilience or low capability.
While not everyone will suffer harm, the FCA said these characteristics may limit people’s ability to make reasonable decisions or put them at greater risk of mis-selling.
As such FG21/1 Guidance for firms on the fair treatment of vulnerable customers has been published today (23 February) and outlines six key areas where firms can effectively tackle the issue of vulnerability.
- Understanding customers’ needs – Understand the nature and scale of characteristics of vulnerability that exist in their target market and customer base.
- Skills and capability – Embed the fair treatment of vulnerable consumers across the workforce. All relevant staff should understand how their role affects the fair treatment of vulnerable consumers.
- Product and service design – Consider the potential positive and negative impacts of a product or service on vulnerable consumers.
- Customer service – Set up systems and processes in a way that will support and enable vulnerable consumers to disclose their needs. Firms should be able to spot signs of vulnerability.
- Communications – Ensure all communications and information about products and services are understandable for consumers in their target market and customer base.
- Monitoring and evaluation – Implement appropriate processes to evaluate where they have not met the needs of vulnerable consumers, so that they can make improvements.
The FCA’s report said that it wants to see the fair treatment of vulnerable customers “embedded as part of a healthy culture throughout firms, not just on the frontline but also in areas such as product development”.
“Firms’ senior leaders should create and maintain a culture that enables and supports staff to take responsibility for reducing the potential for harm to vulnerable customers. They should ensure that firms embed the fair treatment of vulnerable customers in their policies and processes throughout the whole customer journey,” it added.
Nisha Arora, director of consumer and retail policy at the FCA, 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.”
Vulnerability in the utilities sector has been a key area of concern throughout the pandemic and figures published by Citizens Advice in December revealed a 40 per cent increase in the number of people behind on their energy bills, with 600,000 more in debt to their supplier than February.
Responding to the new FCA guidelines Janine Shackleton, policy manager at the Consumer Council for Water (CCW), said: “The FCA guidance will help to reinforce our own efforts in the water industry to ensure water companies not only improve their understanding of the individual needs of customers in vulnerable circumstances but also develop services that are agile enough to support them.
“Sharing best practice across sectors can help to accelerate the change that is needed and we’re delighted the guidance contains some insightful examples of good and poor practice that water companies may be able to learn from.”
An Energy UK spokesperson said: “It’s good to see the FCA recognising the importance of supporting vulnerable customers in this new guidance – much of which mirrors work already going on in the energy sector.
“In response to the findings of the independent Commission for Customers in Vulnerable Circumstances, Energy UK developed the Vulnerability Commitment, which was launched last year.
“This industry-led initiative covers 70 per cent of the domestic customer market and signatories pledge to continuously improve the support they provide to vulnerable households by encouraging innovation, collaboration and commitment to a set of standards that complement and go further than existing guidance and regulations.”