What happened?
In part one of TCC’s vulnerability webinar series, regulatory experts Garry Evans and Gary Maude discuss why vulnerable customers continue to receive worse outcomes in the financial services sector.
While the FCA’s guidelines on vulnerability remain unchanged, recent supervisory reviews highlight a significant gap in how firms apply these rules, resulting in inconsistent execution across customer journeys.
Why does it matter?
Statistics show that only 40% of vulnerable customers disclose their needs to their financial providers. Of those who do, a staggering number report negative experiences compared to non-vulnerable customers.
Furthermore, the FCA has recently issued substantial fines ranging from £5.4 million to £10.9 million to major firms for failing to treat vulnerable customers in arrears fairly, underscoring the severe cost of non-compliance.
Who is affected?
All regulated financial sectors, including wealth management, pensions, banking, lending, consumer credit, general insurance, and motor finance.
Key risks
- Failure to identify vulnerable customers, with 60% of vulnerable clients choosing not to disclose their circumstances.
- Corporate and senior management exposure under SMCR for allowing systematic customer detriment.
- Severe financial costs from fines, Section 166 reviews, and past business reviews (PBR).
Actions to take
- Develop a proactive identification strategy instead of expecting clients to self-identify.
- Review the cultural drivers within your business to ensure customer outcomes are prioritized over sales pressures.
- Assess your compliance controls against recent FCA multi-sector and retail banking reviews.
Wider implications
Supervisors are looking closely at corporate governance. A firm’s inability to protect vulnerable customers is increasingly viewed as a failure of senior leadership and cultural design, rather than just a process error.
Recommendations
Firms should watch the full webinar series and evaluate how effectively their corporate culture translates into positive customer outcomes.
Supporting sources
Frequently asked questions
Why are vulnerable customers receiving worse outcomes?
Mainly due to inconsistent execution, rigid processes, and a lack of proactive strategy rather than a lack of clear rules.
What percentage of vulnerable customers disclose their needs?
Only about 40% of vulnerable customers disclose their circumstances to their financial service providers.
How much can non-compliance cost a firm?
Beyond multi-million pound fines, firms face massive indirect costs from mandatory Section 166 reviews and past business reviews.
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