FCA guidance on the fair treatment of vulnerable customers – the power of the personal touch

After the seemingly endless stream of Consumer Duty publications published in the first year after go-live, the apparent pause in recent months may have been welcome to many. The FCA recently returned to form, however, publishing a trio of reviews and assessments of good and poor practice in customer support, specifically for customers with vulnerabilities, accompanied by a webinar.

This post deals with the FCA’s review of its vulnerable customer guidance and examples of good and poor practice. There’s a separate post on the FCA’s review of firms’ compliance with the customer support outcome. 

Maintaining the status quo

The FCA will not be updating its vulnerable customer guidance – welcome news for pressed compliance teams. 

This does not mean that all firms are manging customer vulnerability to the FCA’s satisfaction, however, it considers that the guidance itself remains appropriate and helpful, supported as it now is by the requirements of the Consumer Duty. 

The FCA’s review was wide-ranging – including interviews with experts, research into the vulnerable customers’ experiences, analysis of Financial Lives survey data and a firm survey. It concluded that firms are focused on delivering good outcomes for vulnerable retail customers, spurred by the emphasis given to this under the Consumer Duty. 

Firms have asked for some improvements to the FCA’s vulnerable customers guidance, including sector- and vulnerability-specific case studies; more guidance on outcomes monitoring; how to handle customers who do not disclose vulnerabilities; and the impacts of multiple intersecting vulnerabilities:

Given its decision not to update its guidance, any further insight on these points will likely arise out of the ‘engage[ment] with industry to support continuous improvement’ promised at the end of the review document. 

Good and poor practice - key lessons for firms

The FCA concluded that firms are focused on delivering good outcomes for vulnerable customers, however, this review contains some important messages for firms. 

Know what good looks like

Define “good outcomes” – a benchmark you can use to identify when vulnerable customers fall short.

Ideally this should be on a per-product basis, to identify issues specific to that product and groups of its customers. This is an area for further work - in our own early 2024 survey of firms, most identified good outcomes by product groups or business lines.

Manufacturers matter

Manufacturers often tell us they’re unsure about their role in supporting the vulnerable. That’s understandable: the FCA’s own messaging focuses on those directly providing customer support. 

However, the general expectation remains: manufacturers play a key role in ensuring product design does not exacerbate vulnerabilities. This is a key way in which manufacturers comply with their cross-cutting obligation to avoid causing foreseeable harm. Many vulnerable customers surveyed reported an ongoing struggle to find products that meet their needs: the FCA’s challenge to manufacturers here is clear.

The FCA wants manufacturers to consider vulnerable customers’ needs at all stages of product design and review; to test the impact of their products on the vulnerable; and to embed inclusive design principles, leveraging relevant third-sector expertise where appropriate . See further our webinar on managing customer vulnerabilities and our podcast interview with the Samaritans on supporting vulnerable customers. 

Examples of good practice in design included the ability to impose gambling blocks, positive friction to reduce impulse gambling, and a product review framework requiring staff to use MI to assess whether vulnerable customers are more likely to exit a product or incur fees. 

The FCA was disappointed that vulnerable customers training generally targeted only customer support staff. A quick win: roll out customer vulnerability training to all staff – including your product governance and design teams.

Governance and monitoring – more to do

The FCA directly addressed firms that outsource customer support. Monitoring and assurance of outsourced arrangements needs to meet the same standard as for functions remaining in-house. Firms outsourcing also need to improve their systems and controls for monitoring and providing assurance that the third party is enabling the firm to meet its regulatory obligations. 

In supervisory dialogue, expect the FCA to ask how you use data to identify areas for your continuous improvement; establish clear escalation processes that feed into your continuous improvement and remediation work; evaluate the effectiveness of the changes you make; and institute senior manager oversight of remedial efforts.

Ideally, a firm would have formal governance bodies with a vulnerable customers remit, though this may not be appropriate for all firms.

The power of the personal touch

As part of its review, the FCA commissioned quantitative and qualitative research including a survey of 1,500 customers. 

It found that there remain barriers to identifying vulnerabilities. Many still fear that they will receive poorer service if they disclose. Organisations with primarily digital customer journeys find it especially hard to identify vulnerabilities (challenger banks and fintechs, take note). However, customers may experience worse outcomes if they are unaware of the support that firms offer.

The key finding, though: vulnerable customers enjoy better outcomes if firms give them more ‘personalised’ support.. 

Tailoring your support to each vulnerable customer is key – this is not an area for standardised responses.

You can crowdsource improvements here. Encourage your customer support staff to share success stories of supporting vulnerable customers. Take isolated examples of good practices and apply them business-wide. 

Interestingly, the FCA mentions a firm where internal approval for engineering support to resolve system issues in respect of third-party account access was not given. The FCA concludes (darkly) that the firm in question had chosen to accept an increased risk of consumer harm, including a risk of customers being locked out of their accounts. 

Further thoughts

Whilst the decision not to update the guidance is welcome, the good and poor practice feedback provides much for firms to consider. There remains work to be done, particularly for firms higher up the distribution chain. For firms on the front line, the feedback should be read in conjunction with the review of firms’ customer support, which covers similar territory. 

Despite the call to manufacturers, the FCA’s feedback remains primarily focused on customer support experiences. Still missing: a broader consideration of systems and approaches that demonstrably improve all customers’ experiences (including those with vulnerabilities). Improving the design of customer journeys can go a significant way to reducing the impact of individual vulnerabilities, reducing the need for bespoke support. The FCA’s expectations may shift in this direction as firm’s Consumer Duty programmes mature.