FCA’s review flags gaps in support for vulnerable consumers

What happened?

In recent months, the FCA published the findings of its extensive work on how financial service firms support customers in vulnerable circumstances – and whether the existing guidance remains appropriate.   

FCA: Treating vulnerable customers fairly, 7th March 2025

Whilst the regulator states that the current guidance, alongside the Consumer Duty regulations remains appropriate, it’s clear that there are sizeable gaps in areas that need to be addressed. The regulator also notes that the wealth and asset management sector continues to fall behind others, with a small number of firms continuing to claim to have very few or no identified customers in vulnerable circumstances.

The FCA findings outlined the following:

» Vulnerable customers receive worse outcomes than non-vulnerable customers, which is intensified if an individual has multiple drivers of vulnerabilities.

» Customers in vulnerable circumstances struggle to find products and services that meet their needs.

» The greatest concern for the FCA is that firms are failing to adequately monitor outcomes for vulnerable customers and, where needed, take action.

It’s important to note that the FCA imposed fines on three firms last year for failures in their treatment of vulnerable customers, indicating that the regulator intends to continue to maintain a strong focus on this area.

In summary:

• Volkswagen Finance was fined £5.4 million over the treatment of customers in financial difficulty. Volkswagen Finance was repossessing vehicles from vulnerable customers without adequately considering their individual circumstances and other options, particularly where the customer needed the car for work.
• HSBC bank was fined £6.2 million over the treatment of customers in financial difficulty for not adequately considering customers’ circumstances when they had missed repayments.
• TSB bank was fined £10.9 million for failing to ensure that customers in arrears were treated fairly. The bank also lacked suitable systems and controls to secure fair outcomes, which can have a significant impact on vulnerable customers.

The FCA has also added that it will continue to take into account the outcomes for customers in vulnerable circumstances as a part of its Consumer Duty work.

Actions to take

Ten ways to improve your support for vulnerable customers

1.Define: What signs of vulnerability a customer may show in your customer base, and what a good outcome for a particular product or service looks like for those with additional and diverse needs.

2. Revisit: How are good outcomes for vulnerable customers measured? Reconsider the range of metrics currently used. Could this range be broader to provide more customer insight?

3.Consider: Are outcomes for cohorts of customers being truly considered when you measure outcomes for vulnerable customers?

4.Review: What is the quality of the data used to measure outcomes for customers, and does it provide actionable insight?

5.Take action: Have a clear strategy on how the data should be used to identify areas for improvement.

6.Design: Incorporate data and insight about vulnerability into product design and review processes for customers in vulnerable circumstances. Educate and train product and service design staff on how their role can affect vulnerable customers.

7.Encourage disclosure: Examine any barriers to disclosure and whether you are communicating the potential benefits of disclosure. According to the FCA’s Consumer Research, only four in ten consumers with characteristics of vulnerability disclosed it to their financial service provider, as many still fear that they would receive poorer service.

8.Risk assess: Customers with one vulnerability are at a higher risk of other vulnerabilities and more likely to receive worse outcomes. How can you identify and support the customers that may have further drivers of vulnerability?

9.Enable: Your customers need your support to make sound financial decisions based on the information that you provide. Testing that your vulnerable customers understand the information received and can make decisions in their best interests is crucial.

10.Ensure: How senior leaders are engaged is critical. Does your firm have any formal governance bodies with a vulnerable customer remit?

Recommendations

Get expert advice

It clearly is a critical time for firms to examine their policies and processes regarding customer well-being and fair treatment. TCC’s experienced team of regulatory experts can help you evaluate and strengthen your approach to customer vulnerability.

• Review the vulnerable customer processes and client journey
• Deliver ‘how to treat vulnerable customers’ training
• Review the embeddedness of changes following the Consumer Duty’s implication

Juana Diaz-Landinez is Regulatory Consultant at TCC Group

TCC’s regulatory specialists are ready to help – get in touch using the form below to discuss the next steps for your firm.