The FCA issued Occasional Paper No.8: Consumer Vulnerability in 2015. It was published with the headline “FCA challenges firms to review approach to consumer vulnerability” and a “test of conscience” issued by the then CEO.

Here, TCC’s Technical Director Judith Wright reflects nine years on about what action firms may have – or have not – taken to prevent causing foreseeable harm to customers.

On 15th March, the regulator announced they will be conducting a review into ‘how firms are acting to understand and respond to the needs of customers in vulnerable circumstances’. This long-awaited review, which was first outlined in 2017, is expected to go further than the originally planned work on age-related issues and to look more broadly into firms’ treatment of all customers in vulnerable circumstances. It will also evaluate whether customers showing signs of vulnerability are receiving the same quality of outcomes as other customers.

Since the publication of the paper nine years ago, have you taken the time to consider how your firm has evolved its approach to supporting vulnerable customers? Over that time, have you challenged yourself and made enhancements to the support offered, and has that been effective in delivering good outcomes for your customers?

Key questions you could ask yourself include:

• Did the Consumer Duty bring any step-change to your business and how would you respond if challenged by the regulator? Will you be able to demonstrate you have enhanced your response to supporting vulnerable customers?
• Are you one of the 49% of portfolio managers or 69% of stockbrokers who have identified no vulnerable consumers?

The recent FCA action against HSBC reminds firms of the foreseeable harm that can happen to customers when an organisation fails to recognise and support those who may be vulnerable. The regulator’s action identified weaknesses in adequacy of the bank’s treatment of customers in payment difficulties, resulting in customers being treated unfairly.

The bank’s systems and controls were also found lacking in identifying potentially vulnerable customers, with inconsistencies in the application of vulnerability markers. This led to missed opportunities for meaningful conversations with vulnerable customers.

Additionally, senior management were not adequately informed about the risks to vulnerable customers, as the focus was primarily on operational and commercial metrics rather than customer outcomes. The regulator also highlighted that training for staff should not only provide examples of potential vulnerabilities characteristics but must also explain how they manifest into challenges faced by customers, for example, their ability to interact with a customer service agent or to make reasoned decisions, or to challenge back on the solutions presented.

Similar findings were also reinforced by the regulator in its review of Consumer Duty implementation in February 2024. Good practice examples included better-quality interactions with customers by specially trained staff who were able to put in place tailored solutions, backed by quality oversight and data enabling targeted solutions. Poor examples included binary approaches to identifying vulnerabilities, for example, making decisions based on age alone, and requiring customers to repeatedly explain their situation to a different member of staff at every point of contact.

Ensure your vulnerable customers receive good outcomes

TCC’s team of regulatory experts can undertake a replica FCA review of your outcomes for vulnerable customers to assess if you are delivering good outcomes, and in turn help you evaluate and strengthen your approach where required.

The FCA has made clear its focus on governance and senior management oversight as stated in Sheldon Mills, Executive Director of Consumers and Competition speech on 20th February 2024, “Board reports will come under greater scrutiny as we look to these to evidence the steps firms are taking to drive good outcomes”.

Get in touch today to find out how we can support your vulnerable customers initiatives and strategy.

Judith Wright is a Technical Director at TCC Group.