On 23 February 2021, the Financial Conduct Authority (FCA) published its guidance ‘FG21/1 Guidance for firms on the fair treatment of vulnerable customers’ in which it explained its expectations of firms, including payment and e-money service providers, on the fair treatment of vulnerable customers. A vulnerable customer is someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.
According to the FCA, firms should take a number of actions to ensure they treat vulnerable consumers fairly:
Understanding customers’ needs: firms should understand the nature and scale of characteristics of vulnerability that exist in their target market and customer base. They should understand the impact of vulnerability on the needs of consumers in their target market and customer base, by asking themselves what types of harm or disadvantage their customers may be vulnerable to, and how this might affect the consumer experience and outcomes.
Skills and capability: Firms should embed the fair treatment of vulnerable consumers across the workforce. All relevant staff should understand how their role affects the fair treatment of vulnerable consumers. Firms should furthermore ensure frontline staff have the necessary skills and capability to recognize and respond to a range of characteristics of vulnerability and should offer practical and emotional support to frontline staff dealing with vulnerable consumers.
Product and service design: Firms should consider the potential positive and negative impacts of a product or service on vulnerable consumers and design products and services to avoid potential harmful impacts. They should take vulnerable consumers into account at all stages of the product and service design process, including idea generation, development, testing, launch and review, to ensure products and services meet their needs.
Customer service: In regard to customer service, firms should set up systems and processes in a way that will support and enable vulnerable consumers to disclose their needs. Firms should be able to spot signs of vulnerability and deliver appropriate customer service that responds flexibly to the needs of vulnerable consumers. Consumers should also be made aware of support available to them, including relevant options for third party representation and specialist support services. Finally, systems and processes that support the delivery of good customer service should be put in place, including systems to note and retrieve information about a customer’s needs.
Communications: Firms should ensure all communications and information about products and services are understandable for consumers in their target market and customer base. They should consider how they communicate with vulnerable consumers, taking into consideration their needs. Where possible they should offer multiple channels so vulnerable consumers have a choice.
Monitoring and evaluation: Finally, firms should implement appropriate processes to evaluate where they have not met the needs of vulnerable consumers, so that they can make improvements. They should also produce and regularly review management information, appropriate to the nature of their business on the outcomes they are delivering for vulnerable consumers.
While firms are not bound to adopt or follow these specific actions, they must meet the standards set out by the FCA’s principles and treat customers fairly. Using the guidance, the FCA will continue to hold firms to account for their treatment of vulnerable customers. Firms can expect to be asked to demonstrate how their business model, the actions they have taken, and their culture ensure the fair treatment of all customers, including vulnerable customers. For many firms, the entire guidance may be relevant to their business. For other firms, only certain chapters might be relevant.
If you have any questions what these guidelines mean for your firm, please do not hesitate to contact us.