On 23 February 2021, the FCA published Finalised Guidance 21/1: Guidance for firms on the fair treatment of vulnerable customers (FG21/1).

FG21/1 applies to all firms where the Principles for Businesses (Principles) apply, regardless of sector. It applies to the supply of products or services to retail customers who are natural persons, even if a firm does not have a direct client relationship with the customer. FG21/1 describes a vulnerable customer as someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.

In FG21/1 the FCA sets out its view of what firms should do to comply with their obligations under the Principles and ensure they treat vulnerable customers fairly. It explains that to achieve good outcomes for vulnerable customers, firms should:

  • Understand the needs of their target market / customer base. The FCA sets out how firms should understand the:
    • nature and scale of characteristics of vulnerability that exist in their target market and customer base; and
    • impact of vulnerability on the needs of consumers in their target market and customer base, by asking themselves what types of harm or disadvantage their customers may be vulnerable to, and how this might affect the consumer experience and outcomes.
  • Ensure their staff have the right skills and capability to recognise and respond to the needs of vulnerable customers. The FCA describes how firms should:
    • 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;
    • ensure that frontline staff have the necessary skills and capability to recognise and respond to a range of characteristics of vulnerability; and
    • offer practical and emotional support to frontline staff dealing with vulnerable consumers.
  • Respond to customer needs throughout product design, flexible customer service provision and communications. The FCA sets out how firms should:
    • consider the potential positive and negative impacts of a product or service on vulnerable consumers, and design products and services to avoid potential harmful impacts;
    • take vulnerable consumers into account at all stages of the product and service design process, including idea generation, development, testing, launch and review, to ensure products and services meet their needs;
    • set up systems and processes in ways that will support and enable vulnerable consumers to disclose their needs;
    • deliver appropriate customer service that responds flexibly to the needs of vulnerable consumers;
    • tell consumers about the support available to them including relevant options for third party representation and specialist support services;
    • put in place systems and processes that support the delivery of good customer service, including systems to note and retrieve information about a customer’s needs;
    • ensure all communications and information about products and services are presented in ways that are understandable for these consumers; and
    • consider how they communicate with vulnerable consumers, taking account of their needs. Where possible, firms should offer multiple channels so vulnerable consumers have a choice.
  • Monitor and assess whether they are meeting and responding to the needs of customers with characteristics of vulnerability, and make improvements where this is not happening. The FCA sets out how firms should:
    • implement appropriate processes to evaluate where they have not met the needs of vulnerable consumers, so that they can make improvements; and
    • produce and regularly review management information, appropriate to the nature of their business, on the outcomes they are delivering for vulnerable consumers.

The guidance in FG21/1 is not a checklist of required actions and will apply to firms in different ways because of the significant differences across and within sectors. Firms will need to use their judgement to decide precisely what the guidance means for them. This will depend on the specific context of the firm, including its size, the markets it operates in, the products it offers and the characteristics of its target market and its customers.

While FG21/1 only applies to firms’ dealings with retail customers who are natural persons, firms should remember that the Principles, including the obligation to treat customers fairly, extend to all customers. Firms may find FG21/1 helpful when considering how to comply with their obligations under the Principles for incorporated businesses. For example, when dealing with a representative of an incorporated business who has characteristics of vulnerability.

The FCA also reminds firms that in treating customers fairly, they should also be aware of their obligations under the Equality Act 2010. It is likely that a breach of the Equality Act, for example failure to provide reasonable adjustments for disabled people, will also be a breach of the FCA’s rules.