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FCA issues draft guidance on dealing with vulnerable consumers

New draft guidance from the Financial Conduct Authority should help dealers in their sales of finance and insurance to vulnerable consumers.

The FCA said firms had sought more clarity, most firms want to do the right thing, and its supervisory work had shed light on why there is still improvement and consistency needed in how some companies treat vulnerable consumers.

Its own Financial Lives Survey found that half of all UK adults display one or more characteristics of being potentially vulnerable, and some groups are more likely to be vulnerable than others, such as those aged under 24 or over 65, unemployed people and those with no formal qualifications.

The regulator wants companies offering finance and insurance to understand the needs of vulnerable consumers in their target market and customer base, and to ensure their staff have the skills and capabilities to address those needs.

This should also translate into practical action, across how the products and services are designed, how customer service is provided, and how information is communicated.

The guidance also requires dealers to build in a process to monitor outcomes experienced by vulnerable consumers, and to use this to continuously improve.

“We want to see doing the right thing for vulnerable consumers embedded in the culture of firms. As a result, firms should be more focused on ensuring that the outcomes experienced by vulnerable consumers are at least as good as those of other consumers.”

The FCA said regulated firms should exercise particular care where customers may be in vulnerable circumstances, and pay attention to the drivers of vulnerability, such as poor health, low ability to withstand financial or emotional shocks, major life events such as bereavement or relationship breakdowns, and low understanding or knowledge of financial matters.

Some may have low English language skills or poor numeracy skills.

It has issued a call for feedback from firms before October 4 on three particular areas: whether the draft guidance covers the right issues and provides clarity; how the guidance could affect firms’ costs  and the extent of the benefits it would bring to vulnerable consumers; and whether the guidance will be sufficient without resorting to additional rules to drive changes.

“We will apply the guidance in a proportionate way and firms should take a sensible approach to how they interpret what they should do,” said the FCA.

The full draft guidance is available here. Responses can be emailed to

Possible ways firms can monitor and evaluate their treatment of vulnerable consumers, according to the FCA:

a. Establishing quality assurance processes that identify areas that require improvement.

b. Testing experiences of vulnerable customers through processes such as mystery shopping, auditing, focus groups and deep dives.

c. Reviewing whether processes and policies are effective in the fair treatment of vulnerable customers.

d. Allowing staff to feedback anonymously when they think processes for vulnerable consumers could be improved.

e. Ensuring it is easy for vulnerable consumers to make complaints, and through multiple channels.

f. Using information on firm’s treatment of vulnerable customers and the customer’s experience to help inform understanding of effectiveness of policies, processes, training and controls in place.

g. Producing Management Information (MI) that captures outcomes for identified vulnerable customers, and making sure it is discussed regularly at an appropriate level, and escalated and acted on where necessary.

h. Senior Management or the Board may request reports on progress and provide challenge where appropriate.

i. Using feedback that may not be directly sent to the firm, including online reviews and social media complaints.

j. Selecting particular products, processes or types of vulnerability for ‘deep dives’ to help better understand where to focus its services or where to make improvements.

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