FCA Publishes Update on How Firms are Treating Vulnerable Customers

Following the introduction of finalised guidance on the fair treatment of vulnerable customers in February 2021, the FCA has now published examples of the positive steps firms have taken to embed its guidance and the areas where it expects to see improvement.

The regulator states that it has seen good examples of individual firms taking positive action to understand the needs of customers in vulnerable circumstances and meet those needs. However, in its recent engagement with retail banks, it has identified examples of inconsistent practice and areas where it expects to see improvement and additional focus from firms.

Examples of good practice

The FCA has seen individual firms taking positive action such as providing flexible customer service, developing the skills and capabilities of staff and creating dedicated support teams. Examples include firms:

• using customer account and spending data to identify those at risk of problem gambling – and offering support and opting those customers out of credit marketing in response
• offering safe spaces in branches for victims of domestic abuse
• including education for linked brokers in their vulnerability strategies
• involving customers in the product and service development process. For example, through focus groups with customers with lived experience of vulnerability and engagement with relevant charities
• taking inclusive design approaches to products and services.

Trade associations and professional bodies have also been shown to be working with their members to support better customer outcomes.

However, despite the good practice outlined above, additional focus is required from firms in the following key areas:

1. Monitoring and MI

Firms are expected to produce, and regularly review, management information (MI) on the outcomes they deliver for vulnerable customers.

Examples of the types of MI that would be beneficial include:

• customer feedback
• behavioural insights
• feedback from specialist support services

However, the FCA says that it has not yet seen MI that is sufficiently well developed to fully feed into and support governance processes. It has also not seen many examples of MI that tracks and gives effective comparisons of outcomes for customers in vulnerable circumstances and other customers. Firms need to further develop and improve their MI.

MI should be taken from across different business areas. There is also evidence to support an over-reliance on complaints data, so firms should go beyond this to gain better insight into the types of harms customers in vulnerable circumstances are more susceptible to. For example, looking at whether customers in vulnerable circumstances incur fees and charges more frequently.

While some firms are already capturing customer needs data, others are not doing this effectively. Useful data on customer needs includes things such as communication needs and information about customers’ characteristics of vulnerability. Firms should ensure they have systems and processes in place that allow staff to record and access information that will be required in the future to respond to customers’ needs. This will prevent customers from having to continually repeat information.

The FCA also says that it has seen limited evidence of MI from firms which demonstrates whether vulnerability training for staff is resulting in improved outcomes for vulnerable customers. The effectiveness of vulnerability training should be monitored to ensure that it is having the desired impact.

2. Product and Service Design

Firms are expected to consider the needs of customers in vulnerable circumstances when developing products and services, across the entire customer journey – including when making changes to existing products or developing new ones.

Most firms have made some progress in ensuring customer service processes meet the needs of customers in vulnerable circumstances, but the FCA feels that few have made good progress in ensuring products themselves were meeting the needs of those customers.

3. Senior leadership driving strategies and culture

Where firms have well-developed vulnerability strategies, there is more likely to be involvement, investment and accountability from senior management. The opposite is the case where senior leaders are less involved, and these firms tend to have strategies in need of improvement.

Firms should ensure that their vulnerable customers strategy encompasses all business areas. Importantly, it needs to be championed by senior leaders. There should be consideration as to who in the firm is responsible for the firm’s approach to vulnerability.

This latest update from the FCA should give firms some ideas of how to assess their own progress regarding vulnerable customers and identify potential areas for improvement in their processes. If you need any assistance on this or any other compliance issues, please contact your RWA Business Manager or email helpdesk@rwagroup.co.uk.