Back in February, the FCA published new guidance outlining its expectations of firms on the fair treatment of vulnerable customers. This guidance is meant to help firms understand what kinds of harm customers might be vulnerable to, while making sure they can receive the same treatment and outcomes as others.

Companies now need to be aware of their new responsibilities under FCA rules, as well as their obligations to comply with the Equality Act 2010.

While I’m sure we all agree that this new guidance is necessary, given the impact of the COVID-19 pandemic, there is understandably some concern among firms about getting it right.

Understanding customer vulnerabilities

The term ‘vulnerable customers’ is tricky. You can imagine that many might not willingly describe themselves as such – which is why firms need to look carefully at a person’s situation and offer the appropriate support and services.

The FCA emphasises that any of us can find ourselves in vulnerable circumstances at any time, and that people’s needs can vary. The authority’s 2018 Financial lives survey shows that 27.7 million adults have circumstances that make them vulnerable, such as ill health, negative life events, low financial resilience and limited capacity.

According to Nisha Arora, Director of Consumer & Retail Policy:

“Protecting vulnerable consumers remains a key focus for us and given the impact of the Coronavirus pandemic, it is more important than ever that firms get this right. The guidance (…) will help ensure vulnerable consumers are treated fairly and achieve outcomes as good as other consumers.”

Why do we need the new Consumer Duty?

At first glance, the FCA’s Consumer Duty consultation appears to be the love child of Treating Customers Fairly (TCF) and Product Governance – it begs the question, is an extra set of requirements really needed?

But the FCA has been working in the background to understand more about customer engagement and understanding, as well as the potential impacts of information overload. Communication, along with the distribution of products and services, has changed a lot since the start of the pandemic. More firms are realising they can communicate digitally and process documents without paper and wet signatures – all while making their business far more streamlined.

However, it’s not all plain sailing. As the FCA made clear in their report, consumers are still being harmed, despite mounting expectations on firms to ensure they receive fair treatment.

None of us like to think the industry is taking advantage of vulnerable customers, and it’s unclear whether this is a systemic, industry-wide problem or a case of the many being tarnished by the actions of a few. Either way, it is undoubtedly happening – and even the poor conduct of a small number of firms is enough to negatively impact thousands of people.

The new Consumer Duty will require firms to put the consumer at the heart of their business, and to ensure their needs, however complex, are appropriately met.

Personally, I’ve lost count of the number of companies in financial services whose websites and marketing materials say they put the customer first – so either they are wrong, or they are not living up to their mission statements.

Be part of the solution, not the problem

So what, if anything, should firms be doing?

The new Consumer Duty won’t come into force until 2022, but the regulatory direction of travel is clear – firms need to be taking steps to avoid ‘reasonable foreseeable harm’.

This will require more of a ‘risk assessment’ approach when it comes to dealing with all customers, particularly those who could be considered vulnerable…

  • Communications need to be easily accessible and easy to understand. Firms must test their communications on their intended target market and assess whether customers are responding appropriately.

  • There must be ongoing monitoring and refinement. The positive results obtained from an initial focus group won’t cut much ice if those results don’t last. The FCA has indicated that firms should be able to provide them with regular evidence of their testing and monitoring activity.

  • Information should be easily found, appropriate for the communication medium and provided at the right time, so that it can support informed decision making. The FCA does acknowledge that long and technical documents may be less digestible, particularly if they’re supplied digitally. They suggest firms consider ways to highlight and bring key points to the fore.

  • Products and services must meet the needs or outcomes that the customer expects. What expectation does the customer have of your product or service, and how can you make sure it’s upheld?

Again, in a nod to developments across financial services, the FCA has noted concern about complex or extended distribution chains, particularly where there is any lack of clarity between the various parties about who is responsible for what.

The requirement is simple. Instead of washing your hands of the matter once an invisible line in the sand has been reached, it’s suggested that you work together with other firms in the chain to the extent each is able to control or influence elements of product design, operation and distribution.

New Consumer Duty – the takeaway

The overarching message from the FCA is for firms to put themselves in their customers’ shoes – to be aware of, or even personally experience, the outcome for them.

When you approach it like that, the Consumer Duty shouldn’t really be that difficult to understand and implement. We’ve all experienced poor customer service, or something not being quite what we expected when we signed up – but that can have long-lasting negative consequences for someone in a more vulnerable life stage.

All the FCA is really asking is that we provide the kind of service we would expect for ourselves, and that we all deserve.


Thomasina McGuigan

Thomasina is Head of Compliance at Seccl. She’s excited by embedding good customer outcomes into our everyday business activities, and strongly believes that compliance can be a business enabler rather than a preventer… She also has a strange obsession with the London Underground.


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