During the Covid-19 crisis, it is more important than ever for regulated firms to consider their approach to treating customers fairly and vulnerable customers. The FCA have published a statement on their expectations for firms to maintain a high-level of compliance in both areas and for organisations to assess their existing controls and measures to ensure adequecy and effectiveness.
The Coronavirus crisis will put pressure on hundreds of thousands of new consumers who may not have experienced such financial difficulties previously and will undoubtedly cause existing vulnerable customers additional anxiety and burden. It is therefore essential that firms are knowledgeable and prepared to deal with these consumers and to have effective policies and trained staff in place.
Vulnerable customers are from all backgrounds, in every society and every walk of life; but they may not always be who you think they are! A global crisis such as the Covid-19 pandemic will push millions of consumers into the ‘vulnerable’ category, resulting in regulated firms being over-burdened by frightened and anxious customers.
Those working in the financial services and consumer credit industries should already be aware of what makes a customer vulnerable and have training on how to deal with such people. However, NOW is the time to review TCF and Vulnerable Customer policies and ensure that you are prepared for a much higher than average influx of vulnerable customers that could last for months.
Understanding Vulnerable Customers
Understanding types of vulnerability, what makes a person vulnerable and how they can be identified, assessed and helped is an essential requirement that not only ensures compliance, but also builds consumer trust in a company’s brand, services/products and abilities.
A vulnerability is not an instantly closed door and should not be something that employees are afraid to handle. With the right information, training and tools, employees should understand what to look for, how to respond and what parameters are in place for proceeding. Many people can be vulnerable and still need financial products or services (i.e. car insurance, mortgages etc).
Acrisis such as Covid-19 can make many people ‘vulnerable’ often without warning (such as the 2008 financial crisis), meaning that regulated firms must always have effective controls and policies in place.
Vulnerable Customer Definitions
We define vulnerable customers in 2 main ways: –
“Customers who are unable, for whatever reason, to make an informed decision at the time of dealing with them – this category includes those with language barriers, hearing & sight difficulties, mental health issues, bereavement, learning difficulties or the elderly. These customers may struggle to make a decision on whether the service or product you are offering is required or in their best interests or may not be able to utilise all of their senses in making a decision.”
“Customers whose welfare (financial, mental, emotional or physical) could be put at risk or detriment by choosing a service or product that you offer – this could be financially, with over-lending or high repayments; mental, through added stress, anxiety or being overwhelmed; or emotionally, through depression, grief or mental/physical illness.”
Identifying Vulnerable Customers
Being able to identify a vulnerable customer is essential, but so is approaching all customers with an open mind and reading between the lines. Many financial service sectors involve repetitive roles that foster complacency. Selling insurance, collecting debts, lending, mortgages – many of these roles come with scripts to help employees stay compliant and remember the selling/talking points.
However, such roles and scripting can cause tunnel vision, with an employee pressing on through the ‘must-say’ points until they have reached the end, sold the product or set up the agreement. Many customers will not divulge that they are vulnerable, so listening (and watching where face-to-face) is essential. This necessitates knowing what to look and listen for and noticing the signals that could indicate a potential vulnerability.
Verbal Indicators – If staff are dealing with customers on the phone or face to face, there are often signs of vulnerabilities. These can include difficulty in hearing or asking to repeat questions or information; displaying a lack of understanding or confusion; language barriers; long pauses or delays in answering; mentioning a vulnerability (e.g. recent bereavement, loss of work/time off work or physical illness); showing signs of indecisiveness; fidgeting or lack of concentration (where customer is present).
Written Indicators – When corresponding with customers by letter or email, vulnerabilities are not as clearly identified as verbal or physical ones. Be on the lookout for language issues through multiple grammatical errors, spelling or general format of text; multiple questions or showing misunderstanding of areas already explained; mentioning in writing a vulnerability; confusion over what has previously been offered or discussed.
Your Vulnerable Customer Program
A vulnerable customer approach is multi-faceted and multi-tiered. A vulnerable customer policy enables a firm to set out its intent, objectives and obligations, as well as providing a supporting document for employees, agents and associated third-parties. Whilst it may not be feasible to define every vulnerability and situation; it is possible to promote an ethos and environment of listening and understanding and to remain flexible and approachable to both staff and customers.
Procedures must be documented, assessed and tested. Unspoken guidance or rules do not work well in business and fall short of the FCA’s expectation in this key area. The how, what, why and when must be defined and then continuously reviewed to ensure accuracy, adequacy, compliance and effectiveness. Vulnerabilities are fluid, situations change and nothing in business is a fixed constant.
An effective vulnerable customer program encompasses opinions and feedback from every level of an organisation and those developing the procedures cannot do so without the valuable input of the people doing the job. Measures, controls and tools for identifying, assessing, handling and monitoring vulnerable customers should include: –
- Audit Checklist
- Policy & Procedure Documents
- Role Specific Staff Reminders, Aids & Scripts
- Clear Reporting Lines
- Support Materials (e.g. braille, large print, audio options, touch phone, key facts document etc)
- Dedicated Training Program
- Employee Assessments & Evaluation
- Audit & Monitoring Programs