Financial Conduct Authority
Consumer Vulnerability February 2015
Occasional Paper No.8
Executive summary Many consumers in vulnerable circumstances are not receiving fair treatment from their financial services providers. Whilst there are examples of good practice in some firms, some people find communicating with providers or accessing products difficult. They may find that they are unable to obtain a flexible, tailored service that meets their needs from firms. We want to help firms identify consumers in potentially vulnerable circumstances, and to attempt to describe what ‘good’ looks like in serving those consumers.
This paper aims:
• to broaden understanding and stimulate interest and debate around vulnerability and
• to provide practical help and resources to firms in developing and implementing a vulnerability strategy
During the course of this project the authors were constantly on the lookout for examples of good practice in identifying and interacting with vulnerable customers. These have been collated and presented in a Practitioners’ Pack, which may support firms to understand what they could be doing to generate better outcomes for consumers in vulnerable circumstances (see Appendix 4). This resource consolidates a range of good practice guides, tips from industry and consumer organisations, together with case studies.
Why this matters
Much consumer protection legislation is underpinned by the notion of the average or typical consumer, and what that typical consumer might expect, understand or how they might behave. However, consumers in vulnerable circumstances may be significantly less able to represent their own interests, and more likely to suffer harm than the average consumer. Regulators and firms need to ensure these consumers are adequately protected.
Financial services have become more important as consumers are expected to take greater responsibility for their financial wellbeing. Services including payment systems are essential for full participation in society and are a key gateway to other services; therefore it’s vitally important that these services and the customer support that goes along with them are designed in an inclusive way.1 This is a particular challenge as services are increasingly offered remotely and online – which does not meet the needs of all customers.
Financial services need to be able to adapt to the changing circumstances that real life throws at people, rather than being designed for the mythical perfect customer who never experiences difficulty. Vulnerability can affect people’s interaction with any consumer market, but it is particularly challenging in the context of financial services due in part to the long-term nature of commitments, and the complexity of products and information.
Increasingly, policy-makers both in the UK and internationally are realising that a flexible approach is necessary to meet the needs of a diverse customer base.
The FCA has developed the following definition to guide its work in this area:
1 We use the definition of inclusive in the British Standards Institution publication BS 18477:2010 which is “the availability, usability and accessibility of a service to all consumers equally, regardless of their personal circumstances”.
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.
8 Financial Conduct Authority
Types of vulnerability
Vulnerability can come in a range of guises, and can be temporary, sporadic or permanent in nature. It is a fluid state that needs a flexible, tailored response from firms. Many people in vulnerable situations would not diagnose themselves as ‘vulnerable’. The clear message from the research carried out for this paper is that we can all become vulnerable. To enable firms to identify potential vulnerability and prioritise their efforts, one option is for firms to use a risk factor approach (for example, bereavement, or illness diagnosis, could be considered risk factors – see p.23 for more details). Multi-layered vulnerability, and sudden changes in circumstances, are particular indicators of high risk.
Vulnerability is not just to do with the situation of the consumer. It can be caused or exacerbated by the actions or processes of firms. The impact of vulnerability is strong and many people are trying to cope with difficult situations and limited resources, energy and time. Stress can affect state of mind and the ability to manage effectively. In such conditions, being confronted by a complex telephone menu system that gives no option of talking to a person; a ‘computer says no’ response; a call handler without time or inclination to listen, or a system that fails to record what may be distressing circumstances and forces the customer to repeat themselves at every point of contact, can all create a spiral of stre