Coronavirus: Highlighting the Treatment of Vulnerable Customers

The FCA’s work on vulnerable customers has been ongoing for a number of years, with Occasional Paper no. 8 on Consumer Vulnerability first published in early 2015 and the more recent Guidance consultation, with finalised guidance due for final publication in early 2021. However, the Coronavirus pandemic brings the FCA’s expectations on the treatment of vulnerable customers into the spotlight.

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The Guidance is due for publication at a critical moment for the UK economy and for personal finance. Since March 2020, the redundancy rate in the UK has increased from 3.8 to 11.3 per 1000 employees – a rate not seen since February 2009, when the financial crash was taking effect. This is significant. 1.62 million people are currently unemployed but looking for work, and with the likely end to current conditions still months away, the figure is likely to continue to rise, with the North East, Wales and Northern Ireland most affected; almost 1 in 10 adults in the North East is on unemployment benefits.

The world at the end of 2020 is a very different one to the summer of 2019, when the FCA’s Guidance on the Fair Treatment of Vulnerable Customers document was first published as part of a consultation. However, it provides an excellent roadmap for firms to consider what they can do to support customers that might need some extra help at this difficult time.

In 2019, the FCA found that around half of UK adults display one or more characteristics of being potentially vulnerable, such as poor mental health, or having been affected by a major life event such as bereavement or job loss. At almost nine months into the pandemic, and with further restrictions on ‘business as usual’ likely until spring 2021, the number of people affected by job loss, anxiety and poor financial resilience is likely to rise further.

There is a clear opportunity for firms to use the FCA’s guidance to drive new standards and processes for the fair treatment of these customers. The benefits for firms are as clear as they are for customers – if firms can adapt to meet the current challenges, there’s the obvious advantage of being able to meet regulatory expectation and fend off potential action, but there’s also the opportunity for positive reputation building.

In the current climate, especially for firms that have not yet begun to embed the FCA’s expectations on the treatment of vulnerable customers, this can seem like an overwhelming task. Our short checklist introduces the basic tasks suggested by the FCA as a guide to auditing current practice and building fair treatment of customers into business processes.

• Understand your customer base:

  • This first step helps uncover whether there are particular types of drivers of vulnerabilities within your customer base, and any groups revealed here will form the foundation of your approach. Every customer is an individual, and every circumstance is different, but where there is a potential grouping – customers with a low average balance, for example – then this can be factored in through the design of products and services and in staff training. Understanding the drivers of vulnerability in the target market can help firms to understand what these customers might need.

• Understand the potential harms:

  • The FCA found that vulnerable customers were more susceptible to harm, and they identified a number of harms that these customers were more likely to experience. The way a firm responds to its vulnerable customers can both increase or reduce the risk of harm, so an important initial step is understanding the main difficulties and problems faced by vulnerable customers, before moving on to consider how products, services and current processes might help or hinder the customer experience in practice.

• Understand how to proactively identify vulnerable customers:

  • One of the major expectations that the FCA has clarified within the guidance is that firms should proactively identify vulnerable customers. How this happens will differ from firm to firm; some firms will be able to train frontline staff to pick up on any indicators within the usual course of customer interactions, but for firms that this type of business doesn’t apply to, data analysis might be more appropriate and useful.

• Make it easy to disclose a need:

  • Auditing customer experience, processes and systems from the point of view of vulnerable customers can help to diagnose whether it is easy for the customer to tell the firm that they might need some extra help. For some firms, this will revolve around staff, who should be trained to respond to indicators and offer customers an open opportunity to disclose. For others, this might involve tools, such as chatbots, to more easily allow customers to tell the firm about their circumstances.

• Consider support options:

  • Identifying a vulnerable customer is only the first step – without understanding what practical support options and help are necessary and possible within the business of the firm, identifying vulnerabilities is inadequate. In practice, this might mean referring to a specialist internal team, or to an external expert. Or it might mean introducing processes for offering appropriate forbearance options, given the customer’s personal circumstances.

• Design systems and processes:

  • Using what you have understood from the initial audits and investigations, adapt and amend current process and procedure to make it easier for customers to disclose, for staff to more easily understand how and when to record a customer’s vulnerability, and to demonstrate when and how support should be offered and what that support might look like.

The FCA make the importance of good, regular staff training very clear. Frontline staff that are able to identify and support vulnerable customers are a firm’s first stronghold in the fair treatment of these customers. Staff should understand how to identify vulnerable customers, how to assess their needs, and build the right skills to treat and support these customers fairly.

We offer a dedicated online training course on the fair treatment of vulnerable customers. Priced at just £15 per user, the course is accessible at the delegate’s convenience and provides a certificate upon successful completion, allowing firms to track and record each user’s progress.

For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.bell@rbcompliance.co.uk.