The FCA reviews firms’ treatment of customers in vulnerable circumstances

On 15 March 2024 the FCA announced that it would be conducting a review into firms’ treatment of customers in vulnerable circumstances.  The FCA is now writing to firms, conducting the review. In line with its 2021 commitment, it continues the work in this area and is seeking responses from a range of firms across different markets. Selected firms are asked to complete a questionnaire so that the FCA can gather intelligence on how firms are acting to understand and respond to the needs of customers in vulnerable circumstances.

Whilst the survey is voluntary, it is recommended that firms do respond to it to demonstrate engagement with the Regulator, and that firms do so before the 14 May 2024 deadline. It will be followed up with a more in-depth piece of work with a subset of firms to help the FCA better understand the detail around the actions that firms are taking.

The survey is detailed, covers a wide variety of topics and issues, and takes time to complete fully.  In particular, it refers to ‘individual retail customers’ without clarification of what ‘individual retail customers’ are.  This could be interpreted differently in different sectors and different firms.  It will include all consumers, potentially ‘individuals’ as defined for consumer credit purposes, and potentially sole traders in an insurance distribution context.

If a firm answers ‘no’ to the third question (does the firm deal with individual retail customers), the survey ends.

Firms should be aware of their obligations towards vulnerable customers and have systems and processes in place to ensure they receive the right outcomes. This is not just good business practice, but ensures alignment to the Consumer Duty as well. The survey is relatively in-depth as it seeks to elicit information around the firm’s customer mix and product spread, it also asks firms to describe the actions they have already taken to ensure good outcomes. It goes on to request information around staff training, product testing, and the review processes firms are maintaining to ensure vulnerable customers are treated properly. There are questions associated with the type of MI firms are using, and whether they are using Artificial Intelligence (AI) or big data to help inform their approach to these customers.

As such, it is another example of the FCA gathering data to help shape its approach to supervision. We recommend that firms who are approached should take the time to complete the survey, and use the opportunity to make any adjustments to their systems and processes which may become apparent. A copy of the response should be retained in case of future query.

For more information on what the FCA expects from firms, read its Guidance for firms on the fair treatment of vulnerable customers.

Please get in touch with the team at UKGI if you have any questions on this subject or if you’re looking for support with any compliance matters.    01925 767888

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