A clear signal from the FCA for firms to do more on vulnerability

Money Advice Trust chief executive Joanna Elson OBE, who chaired the Financial Services Vulnerability Taskforce, blogs on the FCA’s new vulnerability guidance, published today.

While it may not be the announcement leading the news bulletins today, this morning saw an important development as the Financial Conduct Authority launched its consultation on proposed new guidance for firms on the fair treatment of vulnerable customers.

The regulator will now consult on the proposed guidance on over the coming months as it finalises its plans to move this agenda forward – a process that the Trust, given our long-standing work on vulnerability, will be closely engaged in.

Our vulnerability lead Chris Fitch will be expanding on his first take on the guidance on the blog in the coming days – and in the meantime, here are my initial thoughts.

Progress, rightly, recognised

As the former Chair of the Financial Services Vulnerability Taskforce, set up following the FCA’s original Occasional Paper on this important topic back in 2015, I am pleased to see a recognition in the FCA’s guidance of the significant progress that many firms have made in the intervening years. The Taskforce had a galvanising effect and the FCA is right to note the progress that resulted from its work.

At the Money Advice Trust, we have seen much of that progress first-hand, through our growing work with creditors to improve policies and procedures, and train staff on identifying, understanding and supporting customers in vulnerable circumstances. The team has now trained more than 19,000 staff in more than 200 creditor organisations – and demand for our training has never been higher.

A clear signal to do more

However, the FCA is correct to highlight that this progress has not been uniform across financial services – and as today’s announcement reminds us, we need to do much more.

This is one of the reasons that the team here at the Money Advice Trust worked with other like-minded organisations to persuade the FCA to abandon its plan to move away from its current, established and successful definition of vulnerability last year. As our vulnerability lead Chris Fitch explained this time last year, the FCA made the right call on this – and we were pleased that our representations were heard and acted upon.

A helpful focus on product design and firm-wide approaches

The resulting vulnerability guidance for firms published today sets out the regulator’s clear expectations on firms – and it is particularly welcome to see the FCA place a strong emphasis on the ‘upstream’ opportunities that firms have to support vulnerable customers through product design. This is a growth area for the industry with a great deal of potential for positive change.

Similarly, the guidance makes it clear that vulnerability must be considered right across firms’ customer services and customer interactions – taking these issues far beyond the confines of collections departments and specialist teams – out into the business.

Many firms, of course, have long taken this approach – but this is an area where the lack of consistency that the FCA rightly warns about can sometimes be evident.

Engagement in the coming months

Chris and our training and consultancy team here at the Trust, led by Lyndsey Humphries, will be working through this proposed guidance in the coming weeks, and we will be speaking to the financial services firms we have worked with to understand their perspective on its implications. If you would like to be a part of these ongoing conversations please do get in touch.

In the meantime – whatever else is generating the headlines today – the FCA should be congratulated for keeping vulnerability high on the industry’s agenda, where it belongs. As the guidance acknowledges right up front, most firms want to do the right thing for vulnerable customers – and there is a growing body of best practice and support available to help them do this.

The next steps for the industry must be to embed these approaches in greater depth and breadth – and to bring about the consistency across the industry that customers in vulnerable circumstances have a right to expect.

Read the FCA’s guidance here and find out more about the Money Advice Trust’s work with creditors on vulnerability here.

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