FCA vulnerability enforcement action


A timely reminder for all regulated firms to re-focus on improving culture within businesses

The FCA’s recent enforcement action [TR19/1], focusing on customer vulnerability, in the debt management sector should be a ‘wake up’ call for all regulated firms. Within TR19/1, the FCA recognised that many debt management firms (like many firms in all regulated sectors) meet their standards, treat new and existing customers fairly, and deliver appropriate outcomes. However, now is a good time for all regulated firms to refocus their attention on vulnerable customer policies and procedures. It is not surprising that the regulatory focus of many compliance departments are the rules contained in specific sector ‘sourcebooks’ (such as CONC in debt management sector), but equal attention should be applied to the Senior Management Arrangements, Systems and Controls handbook [SYSC] and the Principles for Business; not just to avoid regulatory action, but because it is the right thing to do.

Protecting vulnerable customers is an underlining theme in TR19/1 and It seems that firms who were seen by the FCA as failing had two common issues. These can be summed up as leadership and cultural problems. Both point to a break down in the oversight by those covered by the senior manager regime.

Staff in firms often struggle to identify vulnerable customers and struggle with the fact that vulnerability can be transient. They often, therefore, find it easier to satisfy the resource and commercial needs of the business, but such behaviours again point to a failing cultural environment within a business.

Firms wishing to improve their response to vulnerability issues need to take steps to raise individual staff skills, knowledge and confidence.

Firms who wish to re-focus and improve their treatment of vulnerable customers should also consider the FCA Occasional Paper on Consumer Vulnerability (February 2015); it highlights the risks posed by inflexible services where firms fail or are unable to tailor their services to the needs of vulnerable customers and policy/practice gap at firms, where frontline staff are not aware of or do not implement policies or where frontline staff may not refer people on to specialist teams.

Firms wishing to improve their response to vulnerability issues need to take steps to raise individual staff skills, knowledge and confidence. To do this, all regulated firms need to ensure that policies and procedures translate to all working practices throughout businesses, i.e., culture throughout an entire business must follow the vision behind the instructions. TR19/1 suggests, and these suggestions equally apply beyond debt management firms, that businesses need to re-focus on:

  • identifying and recording a customer’s vulnerability, the severity of the vulnerability or multiple vulnerabilities
  • considering how a customer’s vulnerability might affect the delivery and suitability of the debt advice and the best interests of the individual customer, and how it might affect the customer’s decision making
  • understanding why, when, and how the firm should adapt to meet the individual needs of the customer.

A few courses and a re-focus, however, will not successfully embed the required cultural changes. To make long term positive improvements in the treatment of vulnerable customers firms also need to ensure that quality assurance [QA] tests and measures are fit for purpose, which TR19/1 also identifies. The FCA highlights the need for QA procedures that look beyond single customer interactions and encourages the need for QA systems to take a wider view of the customer relationship.

So, lots to do, but improving outcomes for consumers usually results in improved business performance for firms too.


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Partner - Baxters Business Consultants - a business consultancy undertaking marketing, training, freelance journalism and expert witness services to the residential mortgage lending, building society and financial service industry (April 1993 to date) - www.baxtersbc.co.uk.

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