Treating vulnerable consumers fairly

This page summarises the FCA’s policy work on the fair treatment of vulnerable consumers. It aims to help firms better understand how we define vulnerable consumers, and the steps to be taken to ensure they are treated fairly. 

Video: Treating vulnerable customers fairly

Our video animation explains our approach to ensuring vulnerable customers are treated fairly and outlines actions firms should take.

Why vulnerability matters

Our Principles for Businesses require firms to treat their customers fairly, and we expect firms to exercise particular care with vulnerable consumers. 

When consumers are in vulnerable circumstances, it may affect the way they engage with financial services. Vulnerable consumers may be significantly less able to represent their own interests, they may have different needs and may have more behavioural biases that negatively impact their decision making.

The impact of non-standard needs, together with behavioural biases, could be further exacerbated by firms’ behaviour.

Protecting the interests of vulnerable consumers is a key focus for the FCA. Our Business Plan for 2020/21 states that we will focus on ensuring that the most vulnerable are protected. The 4 external priorities in the Business Plan (enabling effective consumer investment decisions, ensuring consumer credit markets work well, making payments safe and accessible and delivering fair value in a digital age) all require us understand and take strong action to address issues faced by vulnerable consumers in these areas. 

We  know that more consumers are likely to be in vulnerable circumstances since the onset of the coronavirus (Covid 19) pandemic. Many of these consumers will be newly vulnerable and/or have multiple drivers of vulnerability.

How this affects firms

Consumers, including those in vulnerable circumstances, should be confident that they are getting fair access, price and quality when using financial services. To ensure this happens, firms in all sectors need to pay attention to the fair treatment of vulnerable consumers across all their products and services and embed this approach into their culture, policies and processes. 

Our desired outcome is to ensure vulnerable consumers achieve outcomes as good as those of other consumers. We want to be confident that vulnerable consumers are not exploited or targeted with poor-value products and services, and that access to key products and services is fair.

Our definition of vulnerability

We define a vulnerable consumer as someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.

Drivers of vulnerability

We have identified 4 key drivers which may increase the risk of vulnerability. These are:

  • health – disabilities or illnesses that affect the ability to carry out day-to-day tasks
  • life events – major life events such as 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) and low capability in other relevant areas such as literacy, or digital skills

Background and publications

Ensuring vulnerable consumers are treated fairly has been a key focus of our policy since our Occasional Paper in 2015 which we followed with Our Approach to Consumers

Our policy development has been supported by our consumer research, including our Financial Lives Survey. Find out more about our developing approach to protecting vulnerable consumers below. 

  1. Consumer research and Occasional Paper on vulnerability - 2015
  2. Approach to Consumers - 2018
  3. Vulnerability guidance consultation 1 - July 2019
  4. Vulnerability guidance consultation 2 - July 2020
  5. Next steps/ future plans
  6. Actions for firms

1. Consumer research/ Occasional Paper in 2015

Our Occasional Paper in 2015 aimed to increase understanding and discussion around vulnerability. We also aimed to provide practical help and resources for firms to develop and implement a vulnerability strategy.

The paper showed examples of good practice in the way some firms treat consumers in vulnerable circumstances. However, it also highlighted instances in which vulnerable consumers had not received fair treatment from firms.

2. Approach to Consumers 2018

In Our Approach to Consumers we addressed concerns raised in the feedback to Our Future Approach to Consumers consultation paper. The paper explained our vision for well-functioning markets for consumers, and the conditions we want to see to achieve this.

We committed to consult further on guidance for firms on the treatment of vulnerable consumers.

3. Guidance consultation 1: fair treatment of vulnerable customers

In 2019, we launched a two-stage consultation on guidance for firms on the fair treatment of vulnerable customers. This aimed to provide regulatory clarity for firms involved in the supply of products or services to retail customers who are actually, or are potentially, vulnerable.

4. Guidance consultation 2: fair treatment of vulnerable customers

In July 2020, we published GC20/3, the second stage of our guidance consultation. This consultation discusses feedback received to Guidance Consultation 19/3 and seeks views on updated draft Guidance (Annex 4).  

In July 2020, we also published research into the experiences of vulnerable consumers. This was part of our ongoing programme of work to understand the financial lives of consumers across the UK, and it supported the development of our second consultation.

The research report looks at the interactions that 21 vulnerable consumers had with financial services firms, and provides evidence about the impact of the way firms treat vulnerable customers. 

5. Next steps

Our guidance consultation is currently open. We welcome feedback by 30 September 2020.

We expect to publish final guidance on vulnerability in late 2020 or early 2021.

We will monitor how firms respond to our final Guidance through our supervisory work. Where we identify that firms are not treating consumers fairly, the Guidance will inform how we hold firms accountable against our Principles.  

Before responding firms should watch our short video on treating vulnerable consumers fairly, and read our research report on vulnerable consumers’ experiences of dealing with financial services firms.

6. Actions for firms

Firms should:

  • take note of the existing expectations of our Principles for Businesses, and ensure that they treat their vulnerable customers fairly
  • read our consultation and draft Guidance, consider what vulnerabilities exist within their target market and customer base, and respond accordingly
  • provide feedback to our consultation by 30 September 2020
  • once the Guidance is finalised, be able to demonstrate how their culture, policies and processes ensure the fair treatment of all consumers, including those who are vulnerable