In recent years, the UK’s Financial Conduct Authority has in many cases viewed financial regulatory issues by looking at the vulnerability of the impacted consumers. While the FCA’s focus on vulnerable customers is longstanding (and underpinned by its statutory objective of consumer protection), the issue has come into sharper focus with the ongoing Covid-19 crisis and its impact on household finances.

The FCA’s approach is highlighted by:

  • The FCA's latest guidance on firms’ treatment of vulnerable customers. This guidance identifies four key drivers of vulnerability (health, life events, resilience, capability) and six areas for firms to focus on (understanding customer needs, skills and capabilities of their employees, product and service design, customer service, communications, and monitoring and evaluation).
  • The FCA’s latest Financial Lives Survey, which highlights the pandemic’s impact on household finances (with 53% of the UK’s adults now having characteristics of vulnerability and 20m adults having seen their financial position worsen due to Covid-19).
  • Three 2020 FCA enforcement decisions relating to firms’ treatment of vulnerable customers, by which Moneybarn, Lloyds and Barclays were fined £2.7m, £64m and £26m respectively (in addition to collectively paying over £600m in redress to the affected customers). These cases shed further light on the steps that firms can take to provide good outcomes to vulnerable customers.

These recent developments, the ongoing impact of the Covid-19 crisis, and the UK’s uncertain economic outlook and ageing population suggest that vulnerable customers are likely to remain a significant element of conduct risk and regulatory policy in the future.

In our article, we consider recent developments and their implications for firms in the retail sector.