FCA clarifies guidance for firms on vulnerable customers

The FCA has published its final guidance for firms to improve the way the financial services industry treats vulnerable customers.

The regulator’s recent Financial Lives research revealed that 27.7 million adults in the UK now have characteristics of vulnerability, which includes poor health, experiencing negative life events, low financial resilience or low capability.

According to the new guidance, financial firms should understand what harms their customers are likely to be vulnerable to, and ensure that customers in vulnerable circumstances can receive the same fair treatment and outcomes as other customers.

The FCA indicated it will continue to hold firms to account for their treatment of vulnerable customers, and warned that firms can expect to be asked to demonstrate the fair treatment of all their customers.

FCA director of consumer and retail policy, Nisha Arora, said: “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 being announced today will help ensure vulnerable consumers are treated fairly and achieve outcomes as good as other consumers.

“While some firms have made significant progress, we want to see all firms across sectors taking steps to understand and respond to the needs of their customers, particularly those who are most vulnerable to harm.”

Commenting on the guidance from the regulator, AJ Bell senior analyst, Tom Selby, added: “Given the devastating impact coronavirus and the national lockdown has had on people’s lives, it is no surprise the number of vulnerable or potentially vulnerable people in the UK has surged.

“In fact, over half the UK population – almost 28 million people – now demonstrate characteristics of vulnerability. This is truly shocking and while we now have a roadmap out of lockdown, millions will face job and income insecurity in 2021 and beyond.

“Given this backdrop, it is positive to see the FCA re-emphasising the vital role financial services firms can play in identifying people who may be vulnerable today or at risk of being vulnerable in the future.

“Vulnerability, by its nature, can be transient and difficult to spot, so ensuring fair treatment of vulnerable and potentially vulnerable customers is at the heart of each firm’s culture is the right approach.”

Canada Life technical director, Andrew Tully, said that those who are financially vulnerable can be a key target of scammers, and warned that the pandemic has provided a “perfect camouflage” for scammers to increase their activity and “prey on the elderly, vulnerable and financially stretched”.

“The impact of scams is not just a financial hit, the hidden costs to mental health can be severe as victim’s ability to trust is shattered overnight,” Tully said.

“Despite the public message campaigns and the ban on cold-calling, the scammers are either simply ignoring the law or looking to sophisticated campaigns over social media in order to con people out of their savings. We all need to be on our guard and also look out for other family members.”

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