In a recent TCC webinar, our in-house experts – Garry Evans, Chief Product and Commercial Officer, Gary Maude, Director of Advisory Practice, and Juana Diaz-Landinez, Senior Regulatory Consultant – shared practical insights on what the FCA’s expectations around vulnerability mean for firms in real terms.

In part one, Garry and Gary discuss the TCC house view about how firms should approach the identification and treatment of vulnerable customers in line with the FCA’s expectations. While the regulator’s guidance on vulnerability remains unchanged, recent supervisory activity reveals inconsistent application across the industry, prompting renewed focus from the FCA on how firms embed these requirements in practice.

The session explores key areas of concern, shares insights from recent FCA reviews and highlights where firms are falling short, not due to a lack of rules, but due to inconsistent execution and the absence of a clear strategy. With regulatory scrutiny intensifying and enforcement actions on the rise, watch or read the video transcript below to learn what actionable advice firms can utilise to strengthen governance, embed vulnerability strategies throughout the customer journey and ultimately deliver better outcomes.

Watch the first part here:

Garry Evans:

So the purpose of this webinar is to provide the TCC house view on what the FCA requires of regulated firms regarding identifying and treating vulnerable customers. As context, this isn’t being delivered because there are big sweeping changes to the FCA guidance on vulnerable customers as far as they’re concerned, they believe the guidance is correct and clear, and the Consumer Duty principles are still fit for purpose. But they do have an opinion based upon supervisory activity and feedback that some regulated firms are still not applying the guidance correctly and consistently.Today, we’ll talk about the key areas that firms need to focus on and provide the TCC house view on what regulated firms need to do to comply with the FCA guidance on vulnerable customers.

But before we get into that, I want to start with a simple poll to gauge how far off from being fully compliant this audience is. So if you could all get your mice ready and click on how confident you are that your processes and controls comply with the FCA’s guidance on both identifying and managing vulnerable customers, and to ensure that they have equally good outcomes as those without vulnerability. We’ll just give you ten or 20 seconds to have a little think about what you want to put.

Should we have a little look at the results? Very interesting. So obviously we’ve got a small minority of you who, are clearly very diligent, have everything sorted already, but just want to make sure that they check in on what everyone else is saying. And then a bit of a mixed bag, then of some with some confidence actually that’s the majority of you. And then there are a few of you who are not very confident at all. Hopefully we’ll be able to provide some actionable information over the next 25-30 minutes that will help you there.
So on that note, I’m going to hand over to the other Gary to set the scene for what has changed in the world of vulnerability over the last six months.

Garry Maude:

Yeah thanks, Garry. Hi, everyone. Right. Well at the risk of being a very short webinar, not much has changed in terms of guidance or is likely to change. So I guess the question is, why is the regulator still pulling its hair out, so to speak? Now I’m conscious there’s multi-sector firms on the webinar, ranging from consumer credit to mortgage, lending, banking, debt management, insurance, etc.

So, some of the things we bring up today may not apply to you, but I’m hoping we can cover enough bases to make it worth your time. And before we get into the detail, let’s remind ourselves the stats don’t lie. It’s a well-known fact vulnerable customers do seem to receive worse outcomes than none non-vulnerable customers. And those sceptics amongst us might argue maybe that’s unavoidable, because at the end of the day, you know, you’re not charities. You’re there to make money. And, so, so some customers will end up with outcomes that just are fair but not necessarily the ones they want, but let’s park that for a second.

Only 40% of vulnerable customers disclose their needs to their providers. And they then report a negative experience compared to 33% of customers who are not in vulnerable circumstances. And we’re going to touch on the kind of emerging theme of safe harbour, safe environment, which, is, is, a topic that many firms are now engaged in more and more to try and encourage more transparency. But at the same time, we would warn firms that transparency doesn’t just apply to customers. It applies to colleagues, particularly, at the early stages such as sales cycles when there’s conflicts of interests, potentially, not wanting to know the truth, you could argue so that there’s commercial pressures on firms which need to be teased out.

44% of customers, who have those negative experiences, we need to take into account that many times they have multiple and sometimes transient types of vulnerability, which compound the chance of them receiving worse outcomes.

So, circling back to Garry’s question, there have been two notable FCA reviews, one multi-sector and one retail banking in the last six/seven months. They tended to fall to examples of good practice as opposed to, profound changes, or rule interpretations. However, three fines were issued quite significant fines anywhere between six and ten million for poor outcomes. And we all know anyone who’s been in a 166 law enforcement environment that the PBR past business review costs, And the potential for section 166 external costs can and did result in overall cost to these firms of several times the fine.

The worrying thing I thought I found arising from some of those reviews is the FCA lens on senior management, i.e., how on earth did you allow that to happen, which has both corporate governance and SMCR and Consumer Duty implications. If I were to try and capture that just high-level sound bites were the FCA is looking, where firms are trying to improve more focus on culture. Walk the walk. Don’t just talk the talk. And I think most of all have seen the large cultural soundbites that are put on the wall. And the FCA is interested in how you drive those cultural papers down into the business, into process and demonstrate evidence of good outcomes, which have a direct, link back to culture.

Similarly, or focus on having a strategy and end-to-end journey, which captures the inherent risk to customers arising from product distribution services, sales process, aftersales care and how you’ve attached controls to those risks. In other words, historically, firms have reacted well to vulnerability in the main, and are willing to react positively to changes in customer circumstances. But it’s not a strategy. And as part of that, more focus on giving your colleagues appropriate training, more visible planning. And what I mean by that is, making your plan, monitoring the plan, adapting the plan where need be. It’s not one size fits all. It’s not a question of one plan will see the customer out to the desired outcome. And that ongoing theme of one size fits all being too rigid and not acknowledging that circumstances can change.

Vulnerable customers are often quite transient in nature, and the circumstances can be quite transient and fluctuate in nature. And then finally, the last thing I’d say, which will touch on more in the webinar is having more of a cohesive, holistic view of the ripple effect vulnerable customers has throughout the business and how that’s captured in things like risk appetite, culture, reputational risk, three-line oversight, corporate governance, product governance and being really informed as to who’s doing what in the infrastructure. Back to you Garry.

Ready to watch the rest of the webinar? You can watch the full 30 minutes below.

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