The Financial Conduct Authority (FCA) has published guidance on how it expects firms to treat vulnerable customers.
The regulator said 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.
The FCA said this needs to happen throughout the whole customer journey, from product design through to customer engagement and communications.
By financially vulnerable, the regulator means UK adults that have characteristics of vulnerability such as poor health, experiencing negative life events, low financial resilience or low capability.
The FCA said that people can find themselves in vulnerable circumstances at any time and 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.
The FCA said it will use its guidance to continue to hold firms to account for their treatment of vulnerable customers.
The regulator said 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.
Earlier this month, the FCA’s Financial Lives research estimated that 27.7 million Britons were financially vulnerable by October 2020, a 15 per cent increase since February 2020.
“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,” said Nisha Arora, director of consumer and retail policy at the FCA.
“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.”
“What comes across loud and clear from today’s guidance, is that the FCA expects firms to treat every individual customer fairly taking into account their unique circumstances,” said Mark Turner, managing director of Duff & Phelps’ compliance and regulatory consulting practice.
“Firms need to check whether some vulnerable customers might be falling between the cracks, amending processes and training their staff accordingly.
“The responsibility is on financial providers and lenders to ensure every customer is properly evaluated and reviewed to ensure consumer harm is limited. Failure to do so will not only cause serious financial repercussions for consumers but also for the firms themselves.”
The FCA has also published a Memorandum of Understanding (MoU) with the Equality and Human Rights Commission (EHRC), which 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.
The regulator said the MOU will also support its efforts as it seeks to eliminate discrimination and advance equality of opportunity.