The Financial Conduct Authority (FCA) has announced a consultation on guidance for firms on the fair treatment of vulnerable customers.
Correct practice regarding vulnerable customers embedded at firms is the goal for the FCA. Companies will need to think about what it means for their business and customers, and also how to address the needs of vulnerable customers.
Guidance on three particular areas is needed:
- Whether the draft Guidance covers the right issues and would provide firms with the right degree of clarity on what they should do to improve the outcomes for vulnerable consumers;
- How the Guidance could affect firms’ costs and the extent of benefits to vulnerable consumers from changes triggered by the Guidance, and
- Stakeholders’ views on whether the Guidance, as part of the FCA’s regulatory framework, is sufficient to ensure firms take appropriate action to treat vulnerable consumers fairly, or whether stakeholders consider that we need additional policy interventions, such as additional rules, to ensure this happens.
Following this feedback, the FCA will consult on a revised draft and publish a cost-benefit analysis alongside. Furthermore, some firms are blatantly not considering the needs of vulnerable customers and actually causing harm.
The FCA believes that there needs to be more consistency regarding the treatment of vulnerable customers across the industry.
Christopher Woolard, executive director of strategy and competition at the FCA, said: “Protecting vulnerable consumers is a key priority for the FCA and we want to see firms explicitly embedding the fair treatment of vulnerable consumers into their culture. Where we find that firms are not doing enough to ensure that consumers are treated fairly, we will take action.
“Firms need to take particular care to ensure that vulnerable consumers are treated fairly as they may be more likely to experience harm. The guidance should drive improvements across the industry, improving outcomes for millions of vulnerable consumers.”
Comments for the first stage of the FCA consultation for vulnerable customers needs to be handed in by 4 October 2019.
Matthew Drage, head of external engagement at Huntswood, said: “It’s great to see the FCA continuing to take the issue of vulnerability seriously and providing guidance to financial services firms that may not currently have the protection in place to ensure vulnerable customers are treated fairly. As highlighted by the FCA, making this part of a company’s culture should be a top priority and is crucial if we hope to see genuine changes in treatment.
“To achieve this, firms should be looking beyond just undertaking an assessment of their current policies and procedures to identify where improvements can be made, to embedding true cultural change. Customer vulnerability can incorporate multiple challenges – for example, financial hardship, physical or mental health – and so staff must be equipped to deal with the full spectrum of challenges that individuals can face. Professional training on dealing with vulnerable customers should therefore be a priority for firms and we’re interested to see if this is addressed when the final guidance is published.”
Jane Portas, financial services partner and customer outcomes lead at PwC, said: “The FCA’s Consultation Paper published today is the next stage in the regulator’s drive to direct the financial services sector towards a more customer-centric, responsible and purposeful approach. The regulator has gone one step further indicating it may consider the need additional policy interventions and potential enforcement.
“At least half of UK adults may find themselves in vulnerable circumstances at some point in their lives. This includes people suffering bereavement, relationship breakdown (divorce and separation), job loss and illness as well as those who struggle to manage money and financial matters, and those who lack financial resilience.
“The impact of this guidance will see firms forced to reconsider their customer culture. For some this may lead to the need to overhaul approaches and modernise systems. Today the FS sector is largely a product-led market. Firms will need to take a consumer- led approach and consider the customer’s personal circumstances, their disposition, their needs and the potential risks of harm.Such decisions are likely to be costly and require strong leadership to be successful.
“However, the best outcomes will be achieved through a clear corporate purpose and an integrated approach embedded across the business and operating models.”
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