On 5 March 2020, the FCA published a speech by Nisha Arora (Director, Consumer and Retail Policy, FCA) entitled Our approach to ensuring firms treat vulnerable customers fairly.
Key points in the speech include:
- for many years, protecting vulnerable customers has been a key priority for the FCA and it remains so. But five years on from when it started, it’s clear that more needs to be done – to ensure the good progress is maintained and isn’t just in pockets of the sector, and that outcomes for vulnerable customers are consistent across the sector and at least as good as those of other customers;
- the July 2019 draft FCA guidance for firms on the fair treatment of vulnerable customers focuses on four key areas that firms should consider in their own approach to vulnerability: (i) understanding vulnerability (ii) the skills and capability of staff (iii) taking practical action (through product and service design, communications, customer service) (iv) monitoring and evaluation;
- understanding vulnerability is the first critical step to being able to treat vulnerable customers fairly. The FCA expects firms to take a proactive approach to understanding the nature and extent of vulnerability in their target markets and customer base as well as making it easy for customers to disclose information;
- the FCA does not expect to identify the vulnerabilities of each and every customer but rather the common vulnerabilities that may arise in their sector;
- the majority of firms think of frontline staff when there is a discussion about ‘staff’. While frontline staff play an important role, the FCA feels that all staff should be embedding vulnerability into their work. Management also has a significant role and should be supporting all staff to consider vulnerability in their work and enable them to act flexibly where possible to ensure customers’ needs are met. Senior staff and boards play an important role in ensuring that policies are made and embedded into the culture and processes of the whole firm to avoid the policy / practice gap;
- the FCA does not necessarily expect firms to set up bespoke new training schemes on vulnerability – firms must assess how best to upskill and support staff – whether through embedding vulnerability into existing training for some or all staff, or using external resources to inform staff about a particular vulnerability;
- firms should be considering the needs of vulnerable customers in their target market at each stage of the design process and identifying the positive and negative impacts of a product or service on vulnerable customers;
- the FCA is not expecting firms to develop new products solely for vulnerable customers, but rather that firms embed a consideration of vulnerability in their target market into their product design and, where products already exist, assess how these can be tailored to meet vulnerable customers’ needs;
- the FCA expects firms to have customer services and systems in place that support staff to respond flexibly to the needs to vulnerable customers;
- firms’ processes and systems should also help staff record and share information on vulnerable customers’ needs so that customers don’t have to repeat information and staff have the information to hand so they are well prepared to respond;
- firms should also be aware of specialist support for vulnerable customers, either internally such as specialist teams, or externally such as charities or third-party access arrangements. They should ensure that these are accessible and made known;
- the FCA wants firms to consider how good and appropriate communications can help vulnerable customers. Communications should be clear and easy to understand for vulnerable customers. Working in the financial sector, it is sometimes easy to forget that sometimes terms can be quite complicated for customers; and
- firms should also consider what communication channels and what tailored communications they may be able to provide. By offering more communications options, where proportionate, and making information more accessible, customers will be better able both to communicate their needs and to have them met.
At the end of the speech it is mentioned that the FCA will consult on revised draft guidance in the Spring with a view to finalising it later this year. Alongside the guidance, it will also be publishing some qualitative research into the experiences of vulnerable customers in financial services.
