FCA’s Guidance for Companies on the Fair Treatment of Vulnerable Customers
The subject of fair treatment of vulnerable customers has been long discussed in the UK and the FCA has moved forward in publishing the finalised Guidance (published 23/02/2021 updated 08/03/2021).
The Guidance aims to help companies ensure that they are treating vulnerable customers fairly and includes examples of how to put it into practice. The regulators explain what they want to change, who are vulnerable customers, the compliance companies need to take within the regulator’s principles of business and what actions should be taken to treat vulnerable customers fairly.
The changes will drive improvements in the way companies treat vulnerable consumers and bring about a practical shift in companies’ actions and behaviours.
The FCA states, “A vulnerable customer is someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care. Our view of vulnerability is as a spectrum of risk. All customers are at risk of becoming vulnerable, but this risk is increased by having characteristics of vulnerability”.
Characteristics of vulnerability may result in customers having additional or different needs and may limit their ability or willingness to make decisions and choices or to represent their own interests. These customers may be at greater risk of harm, particularly if things go wrong.
The FCA adds, “Our Principles require firms to treat customers fairly and our Guidance makes clear what the standards set by our Principles mean for firms, so that firms understand what we expect of them”.
Because anyone can find themselves in vulnerable circumstances at any time, the Guidance is relevant to companies serving retail customers, including some business customers, regardless of the companies’ size or sector.
According to the CCTA “The guidance follows hot on the heels of the publication of the FCA’s latest Financial Lives Survey. The survey looks at attitudes to money, along with the interaction consumers have had with financial services firms. Findings from this survey show that nearly 28 million people in the UK now have one or more characteristics of vulnerability”.
This means a large proportion of the UK population is at risk and the Covid-19 pandemic has only increased the numbers of individuals that might become susceptible to vulnerability, further pointing the spotlight at companies as to how to best help these customers.
The FCA continues, “Protecting vulnerable consumers is a key focus for us and is more important than ever due to the impact of coronavirus (Covid-19)”.
Companies need to ensure they can recognise and address the vulnerability at any point in a customer’s journey. They also need to be prepared to demonstrate how addressing vulnerability is at the heart of their business model. Companies need to have considered their customer base, product design and the skills their staff require. And this needs to be kept under constant review.
Read the full guidance here
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