Financial Conduct Authority  

FCA sticks with vulnerable client definition

FCA sticks with vulnerable client definition

The Financial Conduct Authority will not be changing its description of consumer vulnerability, after consulting with the industry and consumer groups.

In confirming it will be keeping the original definition, as set out in Occasional Paper No 8 Consumer Vulnerability, the FCA reinforced its position that "vulnerability can come in a range of guises, and can be temporary, sporadic or permanent in nature".

In the consultation on its approach to consumers paper, the FCA said it had considered updating the definition but dropped these plans after some in the industry objected.

The FCA said: "They felt that the revised wording risked narrowing the definition and shifting the responsibility more towards the consumer to self-identify a vulnerability.

"We recognise that the original definition of a vulnerable consumer provides a sound basis that allows stakeholders to develop and adapt it according to their specific business."

The FCA defines a vulnerable person as being "someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care".

The regulator has advocated the creation of policies that ensure indicators of vulnerability are spotted and responded to in a considered manner. This includes ensuring front-line staff can spot signs of stress, grief or depression, and know how to respond.

The guidance outlines strategies firms should adopt to ensure their customers are treated fairly and appropriately, and rejects the notion vulnerability only strikes certain groups of consumer, such as the elderly.

For instance, it said: "Most problems relate to poor interactions, or systems that don’t flex to meet needs, therefore making people’s situations more difficult."

It goes on to say that information must be presented in a clear and digestible fashion, so customers are not blinded by information and can easily differentiate fact from promotion.

Joanna Elson, chief executive of the Money Advice Trust, said: "The FCA’s decision to retain its existing definition of vulnerable consumers is the right approach and shows that vulnerability remains an important priority for the regulator. I am pleased that the FCA has listened to the concerns we raised as a sector about the proposed change.

"From our work training creditors in this area we know there is a growing appetite from many organisations to further improve their processes and training of frontline staff to better support vulnerable customers."

Stephen Lowe, group director of communications at Just Group, said: "Today’s announcement by the FCA tells us it expects firms to pay attention to indicators of potential vulnerability and to have policies in place to deal with consumers who may be at greater risk of harm. But the question has always been ‘who is vulnerable and what makes someone vulnerable?’ So the FCA’s plan to consult next year on guidance for this topic is welcome.

"The fact that the FCA has gone on to say it expects this guidance to inform its supervisory and enforcement work is very good news."