Good job, but keep going: UK FCA’s review of vulnerable customer treatment

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Approach

The FCA’s review, conducted throughout 2024, focused on evaluating firms’ treatment of vulnerable customers and consumer outcomes, how firms are supporting customers in line with the FCA’s 2021 Guidance for firms on the fair treatment of vulnerable customers (the Guidance) and considering whether the Guidance remains effective and appropriate in light of the Consumer Duty. 

The review represents months of work by the FCA and the consideration of a high volume of data from various stakeholders. The FCA has gathered data from (1) interviews with experts, (2) research into experiences of consumers in vulnerable customers, (3) analysis of its Financial Lives survey data, (4) a survey of 725 firms, and (5) follow-up information requests from 29 of those firms. 

The FCA's findings

The FCA has found that many firms have taken positive action and made good progress in supporting vulnerable customers. However, only 4 in 10 consumers with characteristics of vulnerability have disclosed their circumstances to any of their financial services providers. Additionally, vulnerable consumers – especially those with multiple characteristics of vulnerability – may not consistently receive outcomes as good as those of other consumers. Stakeholders suggested that more case studies would help support firms achieve better outcomes for vulnerable customers. As a result, the FCA has published case study examples of good practice and areas for improvement. 

The FCA found that firms view the Guidance as both clear and useful. Experts said it has had a positive impact on firms' approaches including through positive changes in firms’ attitudes, cultures and awareness regarding vulnerability and their practices. Additionally, both firms and experts consider the Guidance and the Consumer Duty to be complementary. In fact, the FCA notes that the Consumer Duty has driven a renewed focus across firms to deliver good outcomes for vulnerable customers. Given the success of the Guidance, the FCA is not proposing to change or update it at this time. 

Acknowledging that the Guidance cannot and should not try to cover case studies for all circumstances, some firms and experts suggested potential areas for future improvement. Suggestions included the addition of sector-specific case studies on how to treat customers with specific characteristics of vulnerability, further guidance on data-monitoring methods, further guidance on how to treat customers who do not disclose vulnerability (both where detectable and undetectable by firms) and referencing intersecting characteristics of vulnerability in the Guidance.

Good practice and areas for improvement  

The FCA identified the following areas of good practice: 

• A small number of firms used data effectively to identify where vulnerable customers were experiencing worse outcomes than others.
• There were examples of firms delivering flexible and tailored consumer support. This was strengthened by training frontline staff on how to support customers with characteristics of vulnerability. 
• Some firms have taken steps to review and improve the clarity of their messages to customers, tailor communications, and provide these in a timely manner to make sure customers understood product information, 
• There were examples of firms incorporating feedback from vulnerable consumers’ experiences in product and service development processes. 
• The FCA highlights the importance of using good quality data. Most firms are currently using complaints data, staff feedback and quality assurance findings, however fewer firms use customer feedback directly from vulnerable customers, behavioral insights data and data on referral and take up rates of additional support. The FCA suggests that these wider sources may help firms understand the experience of vulnerable customers more. 

Areas for improvement include:

• Most firms were unable to show how they effectively monitor or take action on outcomes for vulnerable customers. This included a lack of clarity on what firms consider to be good and poor outcomes, poor data and unclear approaches regarding actions to take in response to poor outcomes. 
• Some firms failed to identify vulnerable customers, encourage customer disclosure and provide appropriate support. Only 57% of consumers who disclosed their vulnerability felt that their provider cared, and 58% said their provider made changes as a result. On the other hand, the FCA saw several examples of firms using artificial intelligence (AI) to help identify potential characteristics of vulnerability. For example, a firm used real-time speech analytics during calls with prompts generated for frontline staff when customers said something indicating a potential characteristic of vulnerability. 
• There were examples of firms not providing appropriate or accessible channels for vulnerable customers and a lack of testing of consumer understanding. Vulnerable consumers were more likely to report that they had failed to get the information they needed from firms and to report a slower response to enquiries than other customers. 
• Most firms could not show how they had embedded the needs of vulnerable customers into product and service design. Only 29% of firms said they tested the impact a product or service has on customers with characteristics of vulnerability and whether the product meets the needs of such customers in their target market. The FCA also saw a lack of training on vulnerability for product and design staff, with only 54% of firms who currently have training in place for non-frontline staff reporting that training or guidance for those staff included how vulnerability is relevant to their role. 

Next steps

Whilst the majority of the FCA’s findings represent a ‘good news story’ in most respects, firms should look at the examples of good and bad practices and consider whether any uplifts can be made to ensure they provide adequate support and meet FCA expectations. 

Our legal and consulting teams work together to help firms embed vulnerable customer processes into their businesses. Get in touch if you’d like a chat! 

Authored by James Black and Liz Greaves.