Out-Law News | 18 Feb 2021 | 11:14 am | 2 min. read
The number of financial services customers that could be classed as 'vulnerable' increased 15% over the initial months of the Covid-19 pandemic in the UK, and now stands at 27.7 million, a recent survey by the Financial Conduct Authority (FCA) has found.
The FCA undertook two surveys in 2020, in February and in October. It found the number of customers displaying characteristics of vulnerability in UK financial services – from those who have physical and mental health issues, to others showing signs of being affected by life events such as bereavement, or with low financial resilience – rose by 3.7m adults over that period from 24m adults according to the first survey
It is likely that the financial consequences of Covid-19 on customers will remain for a number of years and firms will continue to develop improvements to help those who need it most
Jonathan Cavill of Pinsent Masons, the law firm behind Out-Law, who specialises in financial regulation concerning vulnerable customers, said the findings of the survey "set out a stark reality of how Covid-19 has negatively impacted individuals with respect to financial resilience, vulnerabilities such as mental health, and customer interaction with the financial services sector generally".
"We have seen the industry in many places rising to the challenge to help customers during this challenging time; for example taking steps to ease financial hardship and making changes to account for lockdown measures and the strain on mental health," Cavill said. "It is likely that the financial consequences of Covid-19 on customers will remain for a number of years and firms will continue to develop improvements to help those who need it most."
"Similarly, there are issues regarding customer vulnerability which exist independently of Covid-19 and those will need to be continually addressed and improved upon to ensure the fair treatment of vulnerable customers," he said.
The FCA has committed to protecting the most vulnerable consumers during the pandemic, ensuring that they can get the financial services that they need. In its 2020/2021 business plan it stated that it will be focusing on the longer term economic impacts of Covid-19, which necessarily includes ensuring that vulnerable customers are protected.
Nisha Arora, director of consumer and retail policy at the FCA, said: "While there are some positives in the data, many of the findings are worrying. Since the start of the pandemic, the number of people experiencing low financial resilience or negative life events has grown [from 10.7 million to 14.2 million]. The pain is not being shared equally with a higher than average proportion of younger and BAME adults becoming vulnerable since March. It is likely the picture will have got worse since we conducted the survey."
"Vulnerability remains a key focus for the FCA, and has been brought into sharp relief by the pandemic. We continue to work with the wider financial services sector, including businesses, regulators and government to support and protect consumers. We expect to finalise our guidance on how firms should treat vulnerable customers shortly," Arora said.
According to the FCA survey findings, a growing number of financial services customers in the UK are reporting mental health issues. The regulator said 18% of respondents said they had a mental health condition or illness in its October 2020 survey, up from 12% in the February survey. A sizeable minority of those customers - 43% - were adults aged between 18 and 34 years.
Last year, a survey of more than 1,000 adults carried out by Pinsent Masons identified scope for banks to further leverage data-driven and technological solutions to help their customers better manage both their money and mental health.
Jonathan Cavill and colleague Kathryn Wynn, also of Pinsent Masons, acknowledged though that banks face a challenge in reconciling their obligations under data protection law with the expectations of the FCA over their treatment of vulnerable customers.
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