We all have preconceptions about what vulnerability looks like – whether it is someone with mental or physical disabilities, the elderly and frail or the young. In fact, we all have the potential to become vulnerable – vulnerability can affect anyone.
The FCA define a vulnerable customer as
“someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate care.”[link]
Vulnerability can come in range of guises. It is usually a result of personal circumstances that lead to an individual requiring additional support to achieve a fair outcome. Vulnerabilities can be short-term, long-term, or permanent. They can even be intermittent, so that support is needed at some times, but not at others.
In its latest guidance consultation paper, the FCA has identified four key drivers which it believes may increase the risk of consumer vulnerability. These are:
- Health –conditions or illnesses that affect someone’s ability to carry out day-to-day tasks.
- Life events – bereavement, job loss or relationship breakdown.
- Resilience – low ability to withstand financial or emotional shocks.
- Capability – low knowledge of financial matters or low confidence in managing money (financial capability). Low capability in other areas such as literacy, language, or digital skills.[link]
These are factors which have affected more people than ever during the COVID-19 crisis and are likely to touch even more we emerge from lockdown into an uncertain economic climate. It therefore unsurprising that we have seen, and will continue to see, a significant increase of friends, family members, colleagues and consumers who need additional support. Indeed, whilst the FCA Our Financial Lives 2020 survey in February 2020 found that 46% of UK adults (24.1 million people) had characteristics of vulnerability. By October 2020, their Covid-19 panel survey indicated this had increased to 53%, highlighting that there were many more people who found themselves at greater risk of harm due to the pandemic and its effects.
Whether a customer is vulnerable, or not, must be assessed on a case-by-case basis and this assessment must consider the key factors which may make them susceptible to unfair customer outcomes. Outlined below are the factors the FCA have identified as potential driver for vulnerability:
| Health | Life Events | Resilience | Capability |
| Physical disability | Retirement | Inadequate (outgoings exceed income) or erratic income | Low knowledge or confidence in managing finances |
| Severe or long term illness | Bereavement | Over indebtedness | Poor literacy or numeracy skills |
| Hearing or visual impairment | Income Shock | Low savings | Poor English language skills |
| Mental health condition or disability | Relationship Breakdown | low emotional resilience | Poor on non existant digital skills |
| Addiction | Domestic Abuse (including economic abuse) | Learning difficulties | |
| Low mental capacity or cognitive disability | Caring responsibilities | Low or no access to help and support | |
| Other circumstances that affect people’s experience of financial services eg, leaving care, migration or seeking asylum, human trafficking or modern slavery, convictions |
The Barratt Smith Brown Customer Vulnerability and Debt Collection series of articles takes an in depth look the issue of customer vulnerability and debt collection to help debt collection teams:
- Ensure their staff have the right skills to recognise and respond to the needs of their vulnerable customers
- Have established processes to ensure vulnerable customer needs are met.
- Implement their customer vulnerability strategy across the business and then monitor and assess whether they are meeting and responding to the needs of customers with characteristics of vulnerability, and make improvements where this is not happening
Part 3: How to Identify Vulnerable Customers will be available from 4 November or you can Download the full series now.
Download Customers Vulnerability and Debt Collection Report
Author: Ashley Barratt – CEO Barratt Smith Brown
Leicester based Barratt Smith Brown, has established a strong reputation for providing market-leading debt collection support to the utilities sector. Leveraging CEO Ashley Barratt’s 15 years of experience at Centrica, they have not only provided outsourced support to key industry players such as Business Stream, Bristol Energy and Shell, but have taken a lead role in managing collections for UK energy administration collections – handing over 75% of energy administration cases since 2018. Their expertise in energy administrations led to their key role in helping The Citizen’s Advice Bureau develop their Supplier of Last Resort – Good Practice Guide.
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