Protecting society’s most vulnerable

Recent figures from the Financial Conduct Authority (FCA) suggest that vulnerable consumers seeking financial advice sometimes experience a less-than-sympathetic approach, which has prompted the industry regulator to challenge firms to improve their policies and practices.

The UK’s ageing population, as well as changing trends in public health and society, means that developing more inclusive policies will become increasingly important to the financial sector. Which is why the FCA launched its Occasional Paper on Consumer Vulnerability recently at the British Bankers’ Association conference on protecting consumers in vulnerable circumstances.

FCA Chief Executive, Martin Wheatley, hailed the process as the first step towards a conversation with firms to determine how the regulator and industry can work together to address issues around vulnerability.

Wheatley said: “We all know somebody in a vulnerable situation and we can expect the number of people who find themselves in those circumstances to grow over the coming years. We all need to start thinking about what the solutions to these challenges will be.

Whether it is accessing funds or securing a repayment holiday, we will work collaboratively with firms to identify what inclusive policies could look like and how best we can create the right outcomes for those consumers. It’s a challenge for regulators and firms alike.

‘Inflexible’ consumer protection policies

The definition of a vulnerable client is someone who is especially susceptible to detriment, especially when a firm is not acting with appropriate levels of care. This could include clients who have been diagnosed with an illness, are dealing with bereavement or are in debt.

The FCA’s research shows that many consumer protection policies are designed for a ‘typical’ consumer and are sometimes too inflexible to adequately encompass these types of individual situations. Therefore, if frontline staff can recognise the signs of potential vulnerability, they can more readily refer customers to specialist support where needed.

Consumer organisations have told the FCA that they are seeing people in difficult circumstances struggling with some firms’ rigid policies, exacerbating already stressful situations. For example, one carer who held a legal Power of Attorney reported problems with a cashier refusing to serve her and another refusing to accept her blind mother’s signature. It is a common story, according to the FCA.

The FCA’s research revealed that the response of staff on a helpline or in branch is crucial to a customer’s experience and outcomes. They suggest that frontline staff needn’t be experts in handling these types of sensitive situations but they should know where internal expertise lies and recognise when to refer people on appropriately.

They also found that most problems relate to poor interaction or systems. Some consumers are overwhelmed by complex information and find it hard to distinguish between marketing and important product messages. While in some firms an inaccurate or overzealous approach to the rules, such as those surrounding data protection or affordability, prevent firms from meeting the needs of vulnerable consumers.

A more holistic approach needed

The FCA’s analysis also shows that it is not just those people who experience sudden life-changing events that firms should consider when developing vulnerability strategies. One in seven adults has the literacy skills of a child aged 11 or below, according to the Department for Business, Innovation and Skills. While an estimated 7.1m UK adults have never used the internet and almost half of UK adults do not have enough savings to cover an unexpected bill of £300 or more say the Money Advice Service.

Furthermore, around 800,000 people in the UK now live with dementia, a figure expected to double over the next 40 years. As is the number of people who will be aged over 85 over the next 20 years, both according to Age UK.

New Model Adviser reported that although firms had policies in place to deal with consumers in vulnerable circumstances, these were often “piecemeal” and “good practice was often found in pockets, if at all.”

“The regulator also said there was often a lack of consistency and strategic approach across individual firms,” they added. “The FCA suggested firms adopt a more holistic approach that can adapt to the reality of a wider range of vulnerable circumstances and to routinely embed policies within the organisation.”