Who is responsible for treating vulnerable customers fairly?
09 November 2020
While the FCA finalises its guidance on the fair treatment of vulnerable customers, the coronavirus (COVID-19) pandemic is increasing both the incidence and complexity of consumer vulnerabilities. This presents firms with a range of challenges in meeting both regulatory and customer expectations, one of which is implementing the right governance and accountability framework.
This is no simple task. As the FCA makes clear in its latest guidance consultation, the fair treatment of vulnerable customers impacts almost every part of an organisation. The regulator repeatedly stresses the importance of embedding fair treatment into firms’ culture, policies and processes throughout the whole customer journey. The treatment of vulnerable customers also impacts a range of teams, such as collections, product design, complaints and customer service.
For that reason, the FCA is not proposing to allocate individual accountability for this area under the SM&CR - despite that being suggested by a number of respondents to its first guidance consultation. Its Conduct Rules already ask staff, including senior managers, to take responsibility for treating customers fairly under Principle 6. In the FCA’s view, this approach is enough to ensure that all staff take their responsibilities to vulnerable customers seriously, rather than feeling they can hand off to senior managers.
While this is an understandable approach, firms need to make sure they embed it in a meaningful way. They also need to be careful that making vulnerable customers everyone’s responsibility doesn’t have the unintended consequence of it becoming no-one’s responsibility - with issues falling through the cracks.
In my view, firms should make clear to staff how the fair treatment of vulnerable customers is relevant to their role and what their individual responsibilities are, and consider putting a detailed accountability structure in place. What that looks like will depend on the size and complexity of the firm, and the types of products and services it offers.
But by thinking carefully and proactively about this, firms can prevent customer harm from occurring, and help ensure arising problems are quickly addressed. If it’s not clear who in the organisation is responsible, there’s a greater chance of things going wrong - and of firms facing questions from the regulator.
Firms could take varying approaches to this. One option is to add the fair treatment of vulnerable customers to a senior manager’s statement of responsibility. Operational resilience is a good example here - there’s not a prescribed responsibility for operational resilience, but it’s a priority area where clear accountability and governance is helpful. Like vulnerable customers, it covers a wide range of issues and teams and as such, it’s unlikely to be appropriate for one individual to have sole accountability. How firms approach operational resilience could provide a model for allocating accountability for vulnerable customers - with one senior manager holding overall accountability for the framework, and other individuals having clear responsibility for aspects of it.
Other models firms may consider include giving each product owner responsibility for ensuring their product delivers fair outcomes, or establishing a committee which is responsible for regularly reviewing data on vulnerabilities and outcomes, and appropriately escalating issues to the executive team.
Regardless of the approach taken, firms need to carefully consider what the appropriate governance structure is for their business. Questions firms should ask themselves include:
- Across each stage of product lifecycles, who is responsible for identifying and monitoring vulnerability?
- What governance processes are in place for decisions made in relation to vulnerable customers?
In the current environment, consumer vulnerabilities are rising and firms face even greater pressure. Having the right accountability and governance structures in place is key to ensuring vulnerable customers get the right outcomes, and firms don’t fall foul of the regulator’s expectations.
For more detail on the actions firms can take to meet regulatory expectations on the fair treatment of vulnerable customers, please read our report: Vulnerable customers: translating expectations into actions