The FCA opts for the right approach to defining vulnerability

Chris Fitch cropThe Trust’s vulnerability lead Chris Fitch shares first thoughts on today’s news that the Financial Conduct Authority is retaining its existing definition of vulnerable consumers, with new guidance for firms expected next year.

This morning saw the publication of the Financial Conduct Authority’s (FCA’s) response to its Consumer Approach consultation – with what could be a double dose of positive news for the vulnerability agenda.

Firstly, the FCA will be retaining its existing definition of a vulnerable consumer as ‘someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care’ – and not proceeding with its new definition proposed last year which, as I have argued previously, would have been a potential step backwards for the vulnerability agenda.

I am pleased that the FCA has listened to the concerns about its proposed shift raised by the Money Advice Trust, Money & Mental Health Policy Institute, StepChange Debt Charity, Macmillan, Age UK, the Financial Inclusion Commission and others. The outcome also shows the strength of working in partnership in this space – something I hope will continue.

Secondly, the regulator has committed to a new push on vulnerability, and specifically, new guidance for firms on identifying and supporting customers in vulnerable circumstances set to be published in 2019, “to provide clarity on our expectations of firms and ensure good outcomes for consumers”.

This is a welcome sign of intent from the FCA – and should keep up the momentum on the vulnerability agenda. It will also provide an opportunity for the regulator to capture and spread some of the good practice that has been developed since its Occasional Paper three years ago.

What’s next?

It will be crucial, now, to engage firms on both of these developments. When the Consumer Approach paper was published, I was concerned to find some firms already moving their thinking towards the proposed new definition in the expectation that it was certain to be adopted – and so communicating today’s outcome and what it means will be important.

Here at the Trust we will play our role in that through our work with creditors and we look forward to working with the FCA and firms as the regulator develops the new guidance announced today.

The bigger picture

Of course, the headlines on today’s news from the FCA are likely to focus on its parallel publication of a discussion paper on Duty of Care – brought forward by the government during the passage of the Financial Guidance and Claims Act 2018. This debate and the significant changes that it could shape not only pose fascinating questions for our sector, but also could fundamentally change the way in which customers in vulnerable circumstances are treated – an issue I will return to in the future.

Taken together, these developments confirm that although ‘vulnerability’ is now a very familiar issue for many organisations, it is not a challenge the sector can simply file under ‘done’. Instead, it appears that the momentum that has been built on vulnerability looks set to not only continue – but to increase even further still in tackling the increasingly sophisticated challenges it poses to us all.

Find out more about the Money Advice Trust’s work on vulnerability.

 

Chris Fitch

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

 

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