FCA Issues Guidance on the Fair Treatment of Vulnerable Customers

On 23 February, the FCA published new guidance on the fair treatment of vulnerable customers. This document clarifies the regulator’s expectations on firms when dealing with customers with characteristics of vulnerability.

Protecting vulnerable customers has long been a focus for the FCA and has been afforded greater attention in the context of the Covid-19 pandemic, which has led to an increase in the number of consumers finding themselves in vulnerable circumstances.

Indeed, as explained in last week’s Insight article by my colleague Chloe Morris, the Financial Lives coronavirus panel survey, carried out in October 2020, reveals that some 53% of adults displayed a characteristic of vulnerability, representing an increase of 3 million people since February 2020.

Vulnerable customers are more likely to have additional or different needs which, if not met by firms, could increase the risk of harm for those individuals if, for example, they have difficulties in making decisions or representing their interests due to a characteristic of vulnerability.

Firms are required to treat customers fairly and the new guidance sets standards for firms in dealing with vulnerable customer.

Under the guidance, it is recommended that firms and their staff:

• Understand the needs of vulnerable customers, including the characteristics of vulnerability in their customer base and the impact of vulnerability on their consumers.
• Train staff so that they have the skills and capability to recognise and respond to characteristics of vulnerability appropriately. Moreover, the firm should embed a culture across the organisation where the fair treatment of vulnerable customers is recognised as important.
• Take practical action in terms of product and service design, customer service and communications.
• Monitor and evaluate whether the firm’s measures to meet the needs of vulnerable customers are met. This includes producing and reviewing relevant management information.

Whilst firms are not bound to adopt or follow the specific actions outlined in the guidance, they must adhere to the standards set by the FCA Principles for Businesses.

Remember, the regulator will continue to hold firms to account if they fail to treat vulnerable customers appropriately. Firms should therefore be able to demonstrate how their business model, the actions they take, and its wider organisational culture ensures that the firm is treating all customers fairly.

For further information, please contact your RWA Business Manager.