FCA’s industry guidance looks to do more to help vulnerable consumers

29th July 2020

The Financial Conduct Authority (FCA) has opened a consultation on draft guidance aimed at driving improvements by firms in their treatment of vulnerable consumers.  The Guidance Consultation 20/3 (GC20/3) aims to provide a framework that allows all firms to assess accurately whether they are treating vulnerable consumers fairly, ensuring consistency across the financial services sector. Members may access the publication by clicking here.

The updated Guidance builds on feedback from a range of consumer organisations, firms and trade bodies, including BIBA, that was collected during the first phase of consultation on Guidance Consultation 19/3 (GC19/3) in July 2019. This second consultation had been delayed while the FCA re-prioritised its resources towards urgent interventions to reduce consumer harm resulting from the Coronavirus (Covid-19) pandemic.  The regulator views the updated Guidance as being more important than ever given that significantly more consumers are expected to be in vulnerable circumstances or displaying characteristics of vulnerability since the onset of the pandemic.

The consultation discusses the responses that the FCA received on GC19/3 and seeks views about updated draft Guidance as well as a cost benefit analysis (CBA) for the proposals.

The proposed Guidance illustrates the types of actions firms should take to understand and respond to the needs of their vulnerable consumers, and ensure they treat them fairly in line with their obligations under the FCA’s Principles for Businesses.

A key aim of issuing the proposed guidance is to help ensure that vulnerability is taken seriously by firms, and that it prompts action by firms to embed the fair treatment of vulnerable consumers into their culture, policies and processes throughout the whole consumer journey.

The FCA expects firms to read the Guidance and determine how it should be applied to their businesses. That work should also incorporate senior leaders within firms creating and maintaining a healthy culture in which all staff take responsibility for reducing the potential for harm to vulnerable consumers.

The FCA said that it will monitor how firms respond to the Guidance through its supervisory work. Firms will need to be able to demonstrate how their culture, policies and processes ensure the fair treatment of all consumers, including those who are vulnerable.

Accompanying the draft guidance the FCA has also published research on vulnerable consumers’ experiences of dealing with financial services firms.

The research, which includes 21 case studies of consumers displaying a range of indicators of vulnerability, highlights four key themes for firms:

  • Recognising vulnerability and understanding customers’ needs
  • The value of sympathy
  • The importance of empowered and knowledgeable staff
  • Meeting vulnerable consumers’ communication needs

The FCA is seeking feedback on GC20/3 by 30th September 2020.  BIBA will be submitting an official response to this consultation and members who would like their views to be taken into consideration as part of this process should send them to David Sparkes at [email protected] by Wednesday 16th September.

What happens next?

The FCA plans to finalise the Guidance later in 2020 or early in 2021 once it has had the opportunity to consider feedback from the consultation.  Stakeholder engagement, including firms’ treatment of vulnerable consumers, would continue in 2021 and 2022.  This work would consider where further proactive supervisory work may still be needed and focused on those sectors where the greatest risk for consumer harm existed.

In 2023, the FCA said it plans to evaluate what action firms have taken and whether improvements had been seen in the outcomes experienced by vulnerable consumers.  At the same time, the FCA will look again at how the financial services industry is adapting to meet the needs of older consumers. The regulator committed to doing this in its Occasional Paper 31 on the Ageing Population from 2017. This review was likely to be conducted after the Guidance has been implemented as it is expected to improve the consistency of firms’ treatment of vulnerable older people, the regulator noted.

BIBA members’ compliance and regulation queries should be directed to: [email protected].