FCA consults on new guidance on treating vulnerable customers fairly

Some 50% of UK adults display one or more characteristics of being potentially vulnerable, such as poor health or disability, low resilience or capability or having been affected by a major life event, such as bereavement or relationship breakdown, according to the FCA. The regulator is concerned that a lack of consistency in how these customers are treated by financial firms could put them at risk of harm.

The consultation, which closes on 4 October, is the first of two that the FCA intends to publish on this topic. It sets out the FCA's view of what the FCA Principles require of firms to ensure that vulnerable customers are treated fairly, and may be accompanied by further interventions when the regulator publishes its final draft.

"The fair treatment of vulnerable customers has been an area of focus for the FCA over recent years," said financial regulation expert Andrew Barber of Pinsent Masons, the law firm behind Out-Law.

"The identification and fair treatment of vulnerable customers is something that a number of firms have started work on but many have felt that further guidance from the FCA would be helpful in ensuring they address their regulatory obligations. This consultation will therefore be welcomed by many in the industry. However, now is the time to engage with the FCA and ensure that the proposed guidance covers the areas firms feel they need direction on and that the information provided is useful to them," he said.

The FCA's ultimate aim is for firms to do the right thing for their vulnerable customers, and to have this embedded in firm culture, according to the draft. For firms, this will mean ensuring that outcomes for vulnerable customers are "at least as good" as those experienced by other customers.

The draft guidance is split into three main sections: understanding vulnerable customers and their needs; ensuring staff have the right skills and capabilities to meet the needs of vulnerable customers; and translating that understanding into practical action. It is accompanied by case studies and practical examples, with the intention that these do not provide a checklist for firms but rather options for things that firms can do to comply with the FCA's principles.

The FCA hopes to hear from firms on whether the draft covers the right issues and provides them with sufficient clarity on what they should be doing to improve vulnerable customers, and whether the guidance is sufficient to ensure appropriate action is taken or if new rules or other policy interventions are needed. It is also seeking to understand the potential costs to firms of changes triggered by the new guidance, as well as the benefits the changes are likely to have for consumers.

FCA executive director of strategy and competition Christopher Woolard said that protecting vulnerable customers "is a key priority for the FCA".

"Where we find that firms are not doing enough to ensure that consumers are treated fairly, we will take action," he said.