FCA Publishes Finalised Guidance on Supporting Customers in Financial Difficulty

Earlier this week, the Financial Conduct Authority published their finalised guidance on supporting customers in financial difficulty. The guidance aims to ensure good outcomes for customers in financial difficulty by providing firms with more clarity on expectations and action they should consider when providing support. The guidance will also help firms to meet obligations under ICOBS 2.5 -1R (the Customer’s Best Interests rule as well as Principle 12 and PRIN 2A under the new Consumer Duty, which will come into force on the same day as the guidance on 31 July 2023.

What are the changes to the finalised guidance?

The FCA has made a small number of amendments in relation to:

• Clarifying that the guidance does not set expectations in relation to contracts of large risks distributed to commercial customers.
• a provision setting out that the options available to, and the level of support provided by, firms to achieve the intended outcomes under the guidance will vary. This will depend on the nature of the firm’s relationship with the customer, the firm’s role in the distribution chain, the type and characteristics of the customer and type of product.
• a provision setting out that firms should consider whether, in the particular circumstances, it would be appropriate to refer the customer to another firm in the distribution chain who is in a better position to support the customer.

Who will be affected by this guidance?

This guidance is aimed at:

• insurers and insurance intermediaries
• premium finance firms
• customers in financial difficulty
• consumer representative bodies
• charities and other organisations with a particular interest in insurance and customers in financial difficulty
• trade bodies representing insurance firms

View the full finalised guidance here

Achieving good outcomes for customers in financial difficulty

For firms to achieve good outcomes for their customers, they should understand the needs of their target market/customer base, and that includes the characteristics of vulnerability within their customer base as well as the impact of vulnerability on their consumers.

Firms should also be able to respond to customer needs throughout product and service design, as well as taking practical action towards flexible customer service provision and communications. 

Whilst the FCA does not believe that the guidance will materially impact any groups with protected characteristics outlined under the Equality Act 2010, it has suggested the guidance should help those customers who are more likely to be in financial difficulty to receive better outcomes.

Firms will need to regularly monitor and evaluate whether they are meeting and responding to the needs of their customers in financial difficulty, including vulnerable customers, making improvements in areas where this is not happening. The FCA will also be carrying out ongoing supervision of firms, including reviewing the volume of complaints from customers in financial difficulty regarding how they have been treated by firms once the guidance has been implemented.

Lastly, firms should also acknowledge the importance of training staff so that they have the right skills and capability to recognise and respond to the needs of customers in vulnerable circumstances. In addition to this, firms should also aim to foster a healthy culture across the organisation where delivering good outcomes for customers - whether vulnerable or otherwise - is recognised as important.

Users of the Development Zone can find a range of Consumer Duty courses in their course catalogue. Our new multi module course¸ ‘Vulnerability: Identifying, Understanding and Supporting Vulnerable Customers in Financial Services’, is also new on the platform this month.

For those not currently using the system, you can find out more and request a free 14-day trial here: https://mydevelopment.zone/#getStarted