The latest reports suggest that as many as 1 in 3 adults in the UK feel financially vulnerable. This is in stark contrast to the perspective of firms who typically identify only around 1 in 30 customers as vulnerable. Such an underestimation suggests that firms do not recognise the scale of the issue and therefore are probably not well prepared. Given the apparent extent of those who feel vulnerable, firms should have ways of knowing who these customers are, and of accommodating their needs.
Definitions of financial vulnerability vary. It may be best described as; having difficulty in making regular payments on basic needs, such as housing, utilities and food. Vulnerable customers may have low incomes, may suffer from physical or mental health issues or may be elderly. These customer types are more likely to get in to financial difficulty. This can be out of desperation or as a result of not understanding their obligations.
Last year the FCA undertook an Occasional Paper on vulnerability. In follow-up to this a Vulnerability Task Force has been established. The Task Force has now issued a series of principles to guide firms in ensuring that this group of at risk customers is treated fairly. These principles include the following:
It is interesting that the Task Force also recommended that financial services should collaborate with the utilities and telecoms sectors on the development of best practice. This acknowledges certain similarities in customer management practices between the sectors. Working more closely on similar challenges might benefit both over the long term, not just with regard to this issue but also in resolving others.
READ MORE on the similarities between the Energy Sector and Retail Banking.