FCA to focus on the embedding of Vulnerable Customer Finalised Guidance as its Financial Lives survey shows a rise in the number of consumers who have vulnerability characteristics

Much of the contents of FG 21/1 will be familiar to those who read the previous consultation document, but the key focus for senior managers is now on how to take this forward. The FCA wants to drive improvements in the way firms treat vulnerable consumers and bring about a practical shift in actions and behaviour. The FCA is also keen that firms really understand the needs of vulnerable customers so that they experience outcomes as good as other consumers.

FG 21/1 also usefully provides firms with good and poor practice which provide useful steers for firms on some of the issues that need to be considered. In this article we wanted to provide a case study which highlights some of the practical issues and problems that firms face in delivering fair outcomes for vulnerable customers and what action can be taken to try and improve the treatment of them.

Protiviti Case Study

An outbound call was made to a customer who had missed a payment on a consumer finance loan they had with the firm. When the customer answered her mobile phone the first statement given by the call agent was:

“Hello, this is Brian from ABC lender. You have failed to make a payment to your account this month and you need to make an immediate payment to us today to bring your account up to date. Can you get a credit or debit card with which to make the payment.”

The customer then responded by saying, “Sorry, I have had a few unexpected bills in the last 2 weeks and wasn’t able to make my payment.”

The agent then asked “What was the reason for you missing your payment?” To which the customer responded with “I have had recent bereavement in the family and haven’t really been on top of things for the last 2 weeks”.

As the conversation continued, the agent asked about the customers’ ability to make a payment and, on several occasions, referred to having to follow a process to waive the need for the payment for this month. The agent showed sympathy with the customer situation but had to go through various “gates” of the process to discuss available options. This cumbersome, inflexible approach made for a poor customer experience and a potentially harmful outcome where the consumer had lost faith and trust with the firm.

This example highlights the issues firms face when dealing with vulnerable customers. Here the customer was given no flexibility, no breathing space and the call agent was not allowed to vary from the process or empowered to treat the customer more individually and pause the conversation for another more convenient or suitable time.

The Finalised Guidance from the FCA talks about how firms can achieve good outcomes for vulnerable customers by:

• understanding the needs of their customers
• making sure staff have the right skills and capability to recognise vulnerable customers 
• responding to customer needs throughout product design, flexible customer service and communications 
• monitoring and assessing whether they are meeting and responding to the needs of customers with characteristics of vulnerability, making improvements where this is not happening

Clearly, in the example there are learnings and improvements needed by the firm and this case did result in an overhaul of customer collection processes to consider specific customer vulnerability characteristics and increase the flexibility of how staff could deal with different situations.

Another area where firms have struggled to get to grips with customer vulnerability has been regarding the identification of relevant characteristics and understanding who within their customer base is susceptible to harm. This is an area where Protiviti has supported firms in developing their thinking on the identification of the typical traits and characteristics of vulnerability and indicators that can suggest a customer is potentially or actually vulnerable.

In doing this and understanding the needs of their customers and target market firms need to identify the nature and scale of characteristics of vulnerability that exist. This can be done by establishing what types of harm or disadvantage customers may be vulnerable to, and how this might affect the consumer experience and customer outcomes. In the case study above this enabled the firm to improve the outcomes for particularly vulnerable customers through the collections process.

Whether you take a process approach or you look at customer vulnerability through a product lifecycle all firms need to ensure that they can:

1. be clear on the specific vulnerabilities that exist in their target market and customer base
2. have well trained and informed staff who are empowered to help customers
3. have processes that result in fair outcomes for all customers
4. communicate with vulnerable customers clearly so that expectations are clearly set and met
5. regularly review the approach being taken to ensure the customer outcomes remain fair
6. ensure that controls are in place across the lines of defence to provide assurance, and
7. have clear ownership and governance on all activity

For more information on how Protiviti can support you and your firm in assessing your current approach to vulnerability considering the guidance and the best practice approaches we have seen in other firms please get in contact with the contacts below.