Following the release of the Financial Conduct Authority’s (FCA) draft updated guidance this week for mortgage and consumer credit repossessions, and for consumer credit tailored support, the topic of customer vulnerability continues to be heavily referenced.
Both publications are clear that firms must:
- recognise vulnerability and respond to the particular needs of vulnerable customers;
- have clear, effective and appropriate policies and procedures for dealing with customers in payment difficulties and for those who the firm understands or reasonably suspects to be vulnerable; and
- have adequately trained staff to provide their customers with the help they need.
With final guidance on vulnerability due this quarter (Q1 2021) the FCA has been clear in the actions required of firms, these being that firms should:
- take note of the existing expectations in the FCA’s Principles for Businesses, and ensure that they treat their vulnerable customers fairly;
- read the FCA’s consultation and draft Guidance, consider what vulnerabilities exist within their target market and customer base, and respond accordingly; and
- once the Guidance is finalised, be able to demonstrate how their culture, policies and processes ensure the fair treatment of all consumers, including those who are vulnerable.
Despite the clarity of the guidance from the FCA, we are still seeing ongoing issues arising from firms’ treatment of vulnerable customers.
The re-definition of vulnerability by the regulator and the vast number of people – approximately 24 million – who are now considered vulnerable make it among the most pressing priorities to be addressed by financial institutions in 2021.
FourthLine has asked four key questions that firms should be asking themselves and answering honestly to determine the extent of work that needs to be done:
- Governance: How aware are your board and senior leadership of the volumes of vulnerable customers by type and the quality of outcomes they are receiving?
- People: To what extent and through what means have you trained and empowered staff to recognise and manage vulnerable customers, creating a culture of understanding and empathy?
- Processes: How clearly and to what extent have vulnerable customer challenges, and supporting solutions to these, been mapped and built into business processes (e.g., product development)?
- Technology: What recent solutions have been implemented by the business to both manage and identify vulnerable customers and associated outcomes?
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