FCA’s review flags gaps in support for vulnerable consumers

What happened?

The FCA has published the findings of its extensive review into how financial services firms support customers in vulnerable circumstances, and whether existing guidance remains appropriate.

The regulator confirmed that current guidance, alongside the Consumer Duty, remains appropriate, but found sizeable gaps that need addressing. The wealth and asset management sector continues to fall behind others, with a small number of firms still claiming to have very few or no identified vulnerable customers.

The FCA found that vulnerable customers receive worse outcomes than non-vulnerable customers, struggle to find products and services that meet their needs, and that firms are failing to adequately monitor these outcomes and take action where needed.

Why does it matter?

The FCA has already fined three firms for failures in the treatment of vulnerable customers: Volkswagen Finance (£5.4 million, for repossessing vehicles without adequately considering customers’ circumstances), HSBC (£6.2 million, for not adequately considering customers’ circumstances when they missed repayments) and TSB (£10.9 million, for failing to treat customers in arrears fairly).

The FCA has confirmed it will continue to take vulnerable customer outcomes into account as part of its ongoing Consumer Duty work, signalling sustained supervisory focus in this area.

Who is affected?

Firms across wealth management and financial advice, pensions and retirement income, payments and fintech, banking, lending and consumer credit, general insurance and protection, and motor finance all need to evidence how they identify and support vulnerable customers.

Key risks

• Under-identifying vulnerable customers, particularly in wealth and asset management.
• Failing to adequately monitor outcomes for vulnerable customers and act where needed.
• Barriers to disclosure: FCA research found only four in ten customers with characteristics of vulnerability disclose it, often fearing poorer service.
• Enforcement action, as seen with the fines imposed on Volkswagen Finance, HSBC and TSB.

Actions to take

1. Define what signs of vulnerability your customer base may show, and what a good outcome looks like for those with additional or diverse needs.
2. Revisit how good outcomes for vulnerable customers are measured, and whether the current metrics give enough insight.
3. Review the quality of the data used to measure customer outcomes and ensure it provides actionable insight.
4. Examine barriers to disclosure and how clearly you communicate its benefits to customers.
5. Incorporate vulnerability data and insight into product design and review processes, training relevant staff.
6. Ensure senior leaders are engaged, including through a formal governance body with a vulnerable customer remit.

Wider implications

The FCA is folding vulnerable customer outcomes into its wider Consumer Duty supervision, meaning firms cannot treat this as a standalone policy exercise. Consistent monitoring and evidenced action are becoming baseline expectations across the sector.

Recommendations

TCC’s regulatory experts can help firms review their vulnerable customer processes and client journey, deliver ‘how to treat vulnerable customers’ training, and review how embedded Consumer Duty changes have become.