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FCA warns firms exploiting vulnerable customers in latest guidance

  • 29/07/2020
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FCA warns firms exploiting vulnerable customers in latest guidance
The Financial Conduct Authority (FCA) has revealed it found firms deliberately exploiting vulnerable customers for financial gain as part of its latest research.


The regulator noted the bad practice, along with instances were the vulnerability of customers had not been considered, as it published guidance on how to provide better support.

However, alongside these situations, it also highlighted that there were many examples of good practice and where firms were “thinking carefully about their customers and potential vulnerability”.

Concerns for vulnerable customers have been a growing priority for the FCA and it emphasised that the coronavirus crisis was likely to exacerbate the number and scale of vulnerabilities.

“We expect coronavirus to have significantly increased the number and severity of issues affecting consumers (for example ill health, bereavement and job loss), particularly for those already showing characteristics of vulnerability,” the FCA said.

“This shows that, now more than ever, firms should be paying particular attention to the needs of vulnerable consumers.

“Our consumer research shows that the pandemic and lockdown measures are exacerbating the challenges for many who were already vulnerable. There are also many people who find themselves newly vulnerable due to the pandemic and its effects,” it added.

Four key themes for firms to assess were identified by the FCA’s research, which included 21 in-depth case studies of customers with different concerns and potential vulnerabilities. They were:

  • Recognising vulnerability and understanding customers’ needs
  • The value of sympathy
  • The importance of empowered and knowledgeable staff
  • Meeting vulnerable consumers’ communication needs


Vulnerability taken seriously

The regulator noted that a key aim of its proposed guidance was to help ensure vulnerability is taken seriously by firms.

It wants this guidance to prompt action by firms “to embed the fair treatment of vulnerable consumers into their culture, policies and processes throughout the whole consumer journey”.

“While many firms have made significant progress in how they treat vulnerable consumers, there is still room for improvement and more consistency across the sectors we regulate,” the FCA continued.

“Evidence from consumer organisations and our own regulatory work shows that some firms are failing to think about vulnerability or ensure the fair treatment of vulnerable consumers is fully embedded into their business.

“As a result, there is inconsistency in the way vulnerable consumers are treated.”


Leaders to embed culture

The FCA’s research found that many firms were keen to improve their treatment of vulnerable customers but were unsure how to do this.

It noted that often vulnerabilities were addressed on a case-by-case basis, rather than being more proactive and anticipating needs through provision of products and support services.

And the regulator impressed upon the need for bosses to take leadership of the situation.

“Fair treatment of vulnerable consumers should be embedded as part of a healthy culture throughout firms, not just on the front line but also in areas such as product development,” the FCA said.

“Senior leaders in firms should create and maintain a culture in which all staff take responsibility for reducing the potential for harm to vulnerable consumers.

“In our Approach to Supervision, we outline the focus we place on business models and culture as the key drivers of harm in firms. When we assess culture, we look at what drives behaviour in a firm and what is likely to cause harm,” it added.

The FCA said it will evaluate what action firms have taken and whether we have seen improvements in the outcomes experienced by vulnerable consumers in 2023.


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