Existing defination of vulnerability to be retained by the FCA
The Financial Conduct Authority (FCA) has announced plans to retain the existing definition of vulnerability as it publishes its Approach to Consumers paper, outlining its regulatory treatment of retail consumers.
The regulator launched its consultation in November last year, proposing a new definition for vulnerable consumers, but stakeholders such as the Money Advice Trust highlighted concerns that the proposals risked a shift in focus towards the consumer and away from the actions of financial services firms.
Under the current definition, a vulnerable consumer is “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”.
Joanna Elson OBE, chief executive of the Money Advice Trust, said the retention of the definition was the “right decision”.
She said: “From our work training creditors in this area we know there is a growing appetite from many organisations to further improve their processes and training of frontline staff to better support vulnerable customers.
“With this continued commitment to vulnerability, the industry is in a strong position to build on the progress already made by many firms in their support for customers in vulnerable circumstances.”
Alongside its Approach to Consumers document, the FCA published a new discussion paper on potentially introducing a duty of care for firms and seeking views on what form such a provision might take.
The FCA also plans to consult early next year on guidance for firms on the identification and treatment of vulnerable consumers. This is to provide clarity on our expectations of firms and ensure good outcomes for consumers, particularly vulnerable consumers.
Peter Tutton, head of policy at StepChange Debt Charity, said: “Through our work we see the crucial importance of financial service firms putting the needs of their customers at the heart of everything they do; whether this is giving people in financial difficulty the right help at the right time, or making sure people who need more support get the products and a service that match their circumstances. So clear guidance and direction from the FCA is both welcome and necessary.
“We know that people with additional vulnerabilities are more likely to be on lower incomes, to be behind on their household bills, and to not have enough money to make ends meet. There is a pressing need for government to look for ways to improve the financial health and resilience of households and people with additional vulnerabilities.”
Andrew Bailey, chief executive at the FCA, said: “Consumer protection is absolutely central to the FCA’s purpose and mission. Nearly everyone at some stage in their life will come into contact with a financial organisation and people need to know that they are being treated fairly and that the right protections are in place. Different groups of consumers have different financial needs, which will naturally change over their lifetime.”
“As we have demonstrated in the past we will act to address harm or potential harm using the range of powers and tools at our disposal to protect consumers. To ensure we provide the necessary protections and deliver good outcomes for consumers we need to regularly review our approach, so we can reflect the diverse population of the UK and consumers’ changing needs in a rapidly-evolving and increasingly complex environment. The papers published today are part of this continuing work.”