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Freshfields Risk & Compliance

| 3 minutes read

The UK FCA’s latest Financial Lives Survey spotlights the rise in vulnerable customers

The FCA’s focus on vulnerable customers is longstanding. In the aftermath of the Covid-19 pandemic, the ongoing cost of living crisis, and in the run up to the Consumer Duty coming into force this July, vulnerable customers are firmly in the FCA’s spotlight.

In this context, the FCA’s Financial Lives Recontact Survey 2023 has been released with the full report to follow this summer. This interim survey shows the stark increase in the number of vulnerable customers in the last six months, reinforcing the impact of the cost of living crisis on consumers. The survey findings highlight the continued importance for retail financial services to support consumers in financial difficulty, with a focus on consumer credit, mortgage and insurance firms. It shows a clear trajectory in the FCA’s approach to consumer protection – increasingly high expectations for firms and a willingness to take “assertive regulatory action where firms fail to meet them”.

Key findings from the survey 

As the cost of living crisis continues, the survey indicates more consumers may be falling into the vulnerable category. The FCA defines vulnerable consumers broadly, with four key drivers: health, life events, resilience and capability (for more on this see our blogs here and here). The survey contains a wealth of data, including:

  • An increase in missed payments – the number of adults who missed payments on any domestic bills or who failed to meet any of their credit commitments in three or more of the previous six months went up by 1.4 million (from 4.2 million in May 2022 to 5.6 million in January 2023) and the number of people who felt that making these kinds of payments was a heavy burden jumped from 7.8 million to 10.9 million.
  • Consumers are choosing less insurance protection – consumers are taking increasingly risky attitudes towards their insurance cover. The survey found that 1 in 8 adults who had insurance or protection policies in May 2022 cancelled at least one of their policies and/or reduced the level of cover in the six months to January 2023 to save money.
  • Wider signs of consumer vulnerability – the data demonstrates the marked impact of the rising cost of living on consumers’ mental wellbeing. Around half of UK adults in January 2023 felt more anxious or stressed due to the rising cost of living than in the six months earlier.

Steps that retail firms can take 

The FCA noted that firms had taken measures to safeguard consumers as shown by the positive stories of consumer experiences. Examples include lenders arranging new payment plans to enable customers to pay a reduced amount for a longer period or referring them to not-for-profit debt advisers. In some instances, lenders were proactively reducing costs or helping consumers to do so, for example by offering interest-free overdrafts. Finally, some insurance consumers were able to make significant savings when they contacted their insurer to cancel or reduce the level of cover on policies, with some providers waiving cancellation charges.

The actions being taken by the FCA to increase protection for vulnerable customers are many and continuing. In March 2023, the FCA published forbearance guidance on how lenders can support existing mortgage borrowers. It sets out the flexibility firms have when providing forbearance, and the scope to vary contract terms for borrowers wanting to reduce their monthly payments. Earlier this month, the FCA published the results of its review of 14 firms’ fair value assessment frameworks, which will be a requirement of the new Consumer Duty. Firms will need to undertake fair value assessments to demonstrate whether the price a consumer pays for a product or service is reasonable compared to the overall benefits. The results of the FCA’s review show the approach taken by these firms in their fair value assessments and highlight good and bad practices, which firms should review when considering their own action plans.

As we await the full Financial Lives survey, this initial data provides insights for firms about the numbers of consumers struggling to pay their bills and what firms should be doing in response given the FCA’s increasingly robust stance on protecting consumers. Firms should continue to focus on this area, particularly in the light of the Consumer Duty coming into force on the 31 July 2023.


uk, fca, financial institutions, financial services, retail markets, retail financial services