As the regulatory landscape sharpens its focus on support for vulnerable customers, financial services firms are under renewed scrutiny from the FCA.

And while the regulator’s guidance hasn’t changed significantly, its message is clear: too many firms are failing to consistently apply existing rules effectively to support customers with vulnerable characteristics and deliver fair outcomes for them.

‘Just 4 in 10 vulnerable customers say they have disclosed their needs to their financial services provider.’

FCA

In a recent TCC webinar, our panel of in-house experts – Garry Evans, Chief Product and Commercial Officer, Gary Maude, Director of Advisory Practice and Juana Diaz-Landinez, Senior Regulatory Consultant – explored what this means in practice.

During our webinar, we learnt a mere 18% of firms are highly confident in their processes and controls meeting FCA standards for identifying and managing vulnerable customers. Meanwhile, 68% expressed moderate confidence, leaving 14% feeling uncertain about their compliance.

Here’s a summary of the key themes and takeaways.

The FCA’s stance

There have been no major updates to the FCA’s guidance on vulnerable customers – and that’s the point. The rules are already in place, but the FCA is concerned that firms are not embedding them into their day-to-day practices.

Two recent FCA reviews (multi-sector and retail banking) didn’t introduce new standards but highlighted significant gaps in application. Fines ranging from £6-10 million were issued where poor outcomes and weak oversight were found, particularly where senior management failed to exercise appropriate governance. Plus, substantial redress amounts have also been reported:

• In the range of up to £185 million to HSBC customers who had experienced, or were at risk of financial detriment and a further £50m invested in refurbishing outlets – demonstrating their commitment that having physical branches can bring to vulnerable customers
• Following an FCA review and £10.9m fine, TSB has committed to a comprehensive remediation programme, which totals £105m
• Volkswagen Financial Services has agreed to pay over £21.5m in redress to around 110,000 customers following a £5.4m fine from the regulator

Culture and strategy must drive customer outcomes

The FCA expects firms to “walk the walk,” not just “talk the talk.” That means:

• Aligning culture with strategy around vulnerability
• Driving these values down into business processes, training and risk management
• Creating safe environments – for both customers to disclose vulnerabilities and for colleagues to act ethically without commercial conflicts

A cultural mismatch, especially where frontline staff are incentivised to push sales over service, can directly undermine vulnerable customer protections.

‘44% of customers in vulnerable circumstances reported a negative experience with a financial services firm compared to 33% of customers not in vulnerable circumstances.’

FCA

From reactive to proactive

Vulnerability is rarely static. Life events, health issues or economic shocks can all impact customers suddenly and temporarily. Firms must:

• Understand vulnerability as dynamic and multifaceted
• Move away from models that rely solely on self-disclosure – the FCA reported only 40% of vulnerable customers come forward
• Build proactive processes and train staff to identify indicators of vulnerability without making the experience burdensome or repetitive for the customer

Beyond “being nice”

There’s a critical distinction between being nice and delivering fair outcomes. For example, allowing minimum debt repayments might seem supportive but could prolong a customer’s financial distress. Firms need flexible processes, but not at the expense of consistency. Empowerment must be guided by clear frameworks so that discretion doesn’t lead to random outcomes. Vulnerability planning should include:

• Personalised treatment plans
• Ongoing monitoring and adaptation
• Evidence of fair outcomes through the customer lifecycle

Measurement, monitoring and meaningful MI

Under the Consumer Duty, “show me, don’t tell me” is the obligatory benchmark. Policies alone are no longer enough, and firms must produce credible evidence that they:

• Monitor vulnerable customer outcomes
• Understand root causes of failure
• Adjust services and products accordingly

Two key questions that firms should challenge themselves on are: what data and metrics (quantitative and qualitative) are we capturing, and are we gathering honest feedback from customers who have received poor outcomes?

It’s also imperative that customer insight must be structured, not anecdotal, and senior leaders should be able to articulate and provide evidence of their firm’s end-to-end oversight.

TCC’s house view summarises the FCA’s priorities across five key areas

1. Alignment: strategy and culture must reinforce each other
2. Adaptation: products and processes should flex with customer needs
3. Identification: firms must proactively spot vulnerability, not wait for disclosure
4. Treatment: support must be personalised, proportionate, and consistently delivered
5. Evidence: firms must demonstrate that outcomes for vulnerable customers are fair and that oversight mechanisms are effective

Vulnerability isn’t just a regulatory checkbox – it’s a moral and business necessity. As the FCA’s focus intensifies, firms that get this right will avoid enforcement and build better, more resilient relationships with their customers.

Unlock a fresh perspective on your firm’s advisory approach to supporting vulnerable customers with insights from TCC’s experienced regulatory specialists. Book a no-obligations call to discuss your needs.