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Final FCA Vulnerability Guidance
The Financial Conduct Authority have published their finalised guidance on the fair treatment of vulnerable customers, in support of their aim to ensure that the Regulator affords all consumers – including those in circumstances that makes them vulnerable – an appropriate degree of protection. Early on within the document, this is succinctly summarised as wanting “vulnerable consumers to experience outcomes as good as those for other consumers and receive consistently fair treatment” across the sector. Consistency is one of the main issues here – although the FCA have included guidelines and rules throughout their Handbook on the fair treatment of vulnerable customers, how the rules are applied in practice differs fairly widely, and this Guidance aims to offer clarity on the FCA’s expectations.
Ultimately, the information in the guidance should help to drive improvements across the sector so that vulnerable customers receive the same level of service, the same good outcomes and the same kinds of results as other customers.
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The majority of the guidance is dedicated to setting out what firms are expected to do to understand the needs of their vulnerable customers – this isn’t provided simply as informative material, but should guide the firm’s strategy and planning. Understanding the drivers of vulnerability within their individual customer base, as well as the types of vulnerabilities they are most likely to encounter and the risks to their own customers, such as impaired decision making, should inform the whole customer journey, from product design onwards.
The FCA’s research has informed the directions set out within the guidance. It covers the Regulator’s ‘four drivers of vulnerability’ that are simply explained so that firms can easily see how they might apply to individuals, specific guidance and good practice example for understanding the needs of consumers, understanding the types of harms and risks that might exist, and information on how this might affect consumer experience and outcomes.
Understanding the customer base, potential vulnerabilities in those customers, and their own products and services is the first step, and the Guidance provides real-world examples around how vulnerable consumers can be considered throughout the product and service lifecycle. Considering whether any features of products or services actually exploit vulnerable consumers is something that should happen early on, and then be reviewed regularly throughout product design and implementation. The FCA warns that while some features in products might be obviously harmful, some harms may be unintended, and so real consideration of the practical use of individual products by someone with particular needs should be regularly reviewed throughout the design process.
The FCA have stated their intention to use the guidance to inform potential action against firms. The expectation is that firms may be “asked to demonstrate how their business model, the actions they have taken and their culture ensures the fair treatment of all customers, including vulnerable customers”. In practice, this means that as a minimum, firms should be able to provide evidence that likely vulnerabilities in its customer base have been identified, potential risks and harms have been considered, and that efforts have been made to ensure that products and services are designed and monitored with vulnerable customers in mind.
The guidance in the ‘practical steps’ section sets out a step-by-step list of the expectations at each stage of product development, and while broad ‘best practice’ examples are given, the guidance is not prescriptive and firms are able to apply new or updated practices as best fits their customers and business model.
A substantial part of the guidance is focussed on customer service and on the skills and capability of staff. Customer service processes should be comprehensive and flexible enough to support vulnerable customers in making an initial disclosure of their needs, and signs of vulnerability should be consistently spotted, whether by staff or by automated means. Customer services should be able to respond to the needs of vulnerable customers, and offer support or help where this is appropriate. Frontline staff should have the skills and capabilities to recognise different vulnerabilities in individual customers, and support them in making a disclosure. They should also have the experience and confidence to work with customers to discuss and decide appropriate support.
Although many of the practicalities will differ from business to business – for example, allowing staff additional time to respond to a customer’s needs or to properly consider the best options given the circumstances – the basics are universal. Staff should be able to recognise when an individual might be vulnerable, should understand when additional support is necessary and should be clear on any policies or procedures that might apply. This might include making regular communications about procedures to staff, providing opportunities for staff to share knowledge and experiences, and appointing dedicated vulnerability champions who can offer support for a complex case.
The Guidance sets out that firms should improve the skills and capability of staff in a way that is proportionate to their firm. Training is an effective way to expand practical knowledge relatively quickly. Our dedicated online training course on the fair treatment of vulnerable customers is 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. Users can also re-access the course for up to a year to ensure their knowledge stays up-to-date.
For large groups, we can offer a simplified enrolment service and pricing, simply email Robert.bell@rbcompliance.co.uk.
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