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The FCA has set high expectations on vulnerability

Vulnerability Lead Chris Fitch reflects on what the FCA's new vulnerability guidance means for firms

Chris Fitch

Vulnerability Lead Consultant at Money Advice Trust

Posted February 23, 2021

Following the publication of the FCA’s final Guidance for firms on the fair treatment of vulnerable customers, the Money Advice Trust’s Vulnerability Lead Consultant, Chris Fitch reflects on what the new guidance means for firms.

Someone at the FCA clearly relishes the number 23.

Way back in 2015, the FCA shared its opening thoughts on what ‘consumer vulnerability’ meant in an Occasional Paper launched on the 23rd of February. Four years later, many firms’ Summer Holidays were ‘enhanced’ by an unexpected July 23rd FCA consultation on the content of their first-ever official vulnerability guidance. And today, on February 23rd 2021, we now have the latest installment – the final FCA guidance on vulnerability.

While sadly page 23 of this final guidance did not divulge the secrets of the universe to me, what the opening pages did reveal was the FCA’s simple expectation and message to firms:

“We want to see the fair treatment of vulnerable customers embedded as part of a
healthy culture throughout firms, not just on the frontline but also in areas
such as product development”

In the six years that have passed since the FCA first set-out their agenda on vulnerability, this message is no longer an aspiration, but something firms now have to consistently do.

So what is expected of them?

Vulnerable to what?

Firstly, the final guidance now provides the clearest direction to firms that the key question they need to be asking is ‘what are our customers vulnerable to?’

Anyone who has heard me talk about vulnerability will have been unable to escape me emphasising just how important this is. Therefore seeing this now referenced so explicitly in the guidance (it’s now one of the key requirements for firms in understanding the needs of vulnerable consumers) is encouraging to see.

Asking and answering this question is fundamental, if firms are to put in place the right products, services and support mechanisms for their vulnerable customers.

This is perhaps reflective of a broader development in understanding that firms shouldn’t just look at vulnerability through the prism of just one health condition or life event, but rather think more broadly about difficulties or common harms that consumers may face.

It’s positive to see the FCA dedicating a section of the guidance to discussing these common harms consumers might face, as firms thinking in this way is likely to result in more effective interventions, helping a wider range of consumers.

Design for vulnerability

Secondly, understanding common harms is also crucial in helping to move beyond a purely reactive approach to vulnerability. It can help firms to understand how they need to proactively design products, services and journeys to take account of vulnerability and reduce or remove the risk of harm occurring.

The guidance’s focus on product and service design is perhaps one of the most significant developments from previous iterations of firms’ responsibilities, and one that has the potential to significantly improve outcomes for consumers.

To help firms make a start, we recently published in partnership with Fair By Design a practical guide for firms (itself highlighted in the FCA’s guidance) setting out how firms can use inclusive design approaches in their work.

This is really important. We know how crucial staff identification of vulnerability is (and the FCA re-affirm that staff should identify and probe where potential indicators exist). However, not every vulnerable customer can be identified.

We also know it is critical to create an environment where disclosures of vulnerability are encouraged (and where customer fears are reassured). But not every customer will disclose.

Consequently, designing accessible and useable products that any vulnerable customer can engage with (and which also benefit all of our customers too), is a key part of this ‘trinity’. Just as we wouldn’t ignore identification or disclosure, neither should we overlook design.

Vulnerability data strategies

Thirdly, given the hopes that rest on the guidance, it’s positive to see that the FCA has placed a strong emphasis on data collection, monitoring, and outcomes.

The FCA – as might be expected – do not introduce new requirements on exactly what data firms should record, although they do point to their six core TCF outcomes as important.

Therefore, each firm will need to have a clear ‘vulnerability data’ strategy if they are to understand whether they are delivering on their responsibilities to ensure vulnerable customers experience outcomes ‘as good as’ other consumers.

We know data issues can be challenging for firms, and throughout the process of developing the guidance we’ve seen firms continually ask the FCA for more detail on this. There’s arguably only so much the FCA, as a regulator, can offer here so it’s positive to see them signposting to other sources of help such as the Money Advice Trust and Money Advice Liaison Group practical guides on Vulnerability and GDPR .

Meeting the challenge

So, while today marks the end of a long process that started many years ago, it also signals the start of another chapter, and arguably the most important part of it all.

The guidance reminds firms of how far most of them have come. However, it stresses that firms need to ensure that pockets of competency or excellence do not exist in their business, and that everyone in the organisations needs to consider their contribution to vulnerability.

At the Money Advice Trust we help firms do this, just as we’ve helped more than 300 creditor organisations on vulnerability so far. As firms turn their attention to planning the practical steps they need to continue taking based on the final guidance, I’d encourage you to get in touch to tell me how you’re progressing, what you’ve learnt, and how we can work together.

So, as I continue to look for further signs of the number 23 in regulatory and everyday life, the one initial thought we can take away from today is that we may have a come long way in the last six years, but the next will be even more important.

And even more so, given that the FCA guidance states that they plan to evaluate the impact of their guidance, and the actions firms have taken, in 2023….

The Money Advice Trust is hosting a free webinar discussion on the FCA’s final guidance, led by Chris Fitch with guests including Sarah McKenzie from the FCA, at 11am on Wednesday 3rd March. Register to attend the webinar.

Chris Fitch

Vulnerability Lead Consultant at Money Advice Trust

Chris Fitch is the Money Advice Trust’s Vulnerability Lead Consultant and Research Fellow at the University of Bristol’s Personal Finance Research Centre. View all posts from Chris Fitch.

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