Vulnerable customers encouraged to seek support from financial services firms
Fewer than half (42%) of vulnerable customers have disclosed their personal circumstances to firms, according to the City regulator.
People affected by a vulnerability, such as a health condition, a low ability to withstand financial shocks or low financial and/or digital literacy levels, were also particularly likely to say they had had a negative experience with a financial services firm.
Some 44% of vulnerable customers said they had had a negative experience, compared with a third (33%) of non-vulnerable customers, the Financial Conduct Authority (FCA) found.
Among the vulnerable customers who had disclosed personal circumstances to firms, some said they were encouraged to do so by the firm, and some said they felt it was necessary because of their circumstances.
A quarter (25%) of those in vulnerable circumstances said they feel uncomfortable explaining their situation to a financial services provider.
Reasons for not disclosing personal situations included embarrassment, not wanting to be treated differently and being worried they might get a worse deal.
Some people did not know that their firm would help, while some said their circumstances do not affect their financial affairs.
Three-quarters (74%) of vulnerable customers who told their firm about their circumstances said that staff asked the right questions to understand their situation, six in 10 (57%) felt their firm “cared”, and a similar proportion (58%) said their firm took action to provide support they needed.
The FCA issued guidance to help financial services firms support consumers in vulnerable circumstances in 2021 and introduced the Consumer Duty in 2023, which requires firms to deliver good outcomes for all customers, including those in vulnerable circumstances.
The FCA has published a review and good and poor practice examples to further help firms provide the right care consistent with the Consumer Duty.
Sarah Pritchard, executive director of competition, markets and international at the FCA, said: “It can be hard to tell your bank or insurer about your specific needs but those who ask for help tend to feel more supported.
“We’ve seen good examples where financial firms are making a difference for vulnerable customers, but we know that vulnerable people report more negative experiences than others.
“We want firms to build on the good work identified, to help people open up and make sure they get the support they may need.”
During its research, the regulator gathered data and insight from firms and consumers and engaged with others to explore firms’ treatment of customers in vulnerable circumstances.
It analysed survey responses from 725 firms and consumer research with 1,500 people.
In-depth interviews were also conducted with 20 financial services customers by telephone.
Highlighting examples of how firms have supported vulnerable customers, the FCA detailed the case of a man who suffers from anxiety and often finds himself severely overwhelmed. Nine months ago, his rent increased, and he panicked.
He phoned his bank about his rent increase and told them about his anxiety. His bank offered regular phone calls to check in and offer support.
The customer is now more confident about his finances and trusts his bank more. He particularly likes the fact that the same person calls him every time, the regulator found.
In another case, a woman’s bank now proactively sends her email summaries of phone calls after her hearing aid temporarily glitched during a phone call to the bank, and she explained her situation to the call handler.
The regulator said that in another case, a man with cystic fibrosis, which limits how much he can work, trusts his bank more after it invited him for regular in-branch meetings to discuss his finances.
The customer felt comfortable enough to disclose his cystic fibrosis to them, and he has also started to save regularly, helping to improve his financial situation.
Areas in need of improvement included a lack of training on vulnerability for product and design staff.
The FCA wants firms to consider its findings in their ongoing embedding of the Consumer Duty, which requires firms to put customers at the heart of their product design.
The regulator also highlighted a lack of clarity on what firms consider to be good and poor outcomes.
Firms should act when they identify that any group of retail customers are receiving worse outcomes than another group for the same product, the regulator said.
Some firms failed to appropriately support staff in identifying customers in vulnerable circumstances, encourage customer disclosure, or provide support promptly and with an appropriate level of care, the regulator said.
The FCA also highlighted communications issues, including not tailoring communications or providing accessible communications.
In one case, someone who struggles to use the internet wanted to know by how much their pension payments would increase in the next financial year and phoned their provider a few months in advance.
After being directed through phone menus and not getting through to someone who could help, they gave up.
In another example, a customer with autism, mobility problems and low digital skills was sent a 12-page form by their bank to update information about them.
The customer was worried and contacted the firm by phone several times, but the firm repeated what it had previously said about ways to complete the form.
The firm then wrote to the customer advising that if the form was not completed in 30 days, their account would be restricted.
A family member then made a three-hour round trip to take the customer, who is a wheelchair-user, to their nearest branch.
Tom Selby, director of public policy at AJ Bell, said: “For anyone using some or all of their retirement pot to buy an annuity from an insurance company, being honest about any health or lifestyle factors that might reduce your life expectancy is absolutely vital.
“Being open about a physical ailment with a firm you don’t know might feel uncomfortable, but when it comes to annuities, it could result in you receiving thousands of pounds more income each year.”
Mr Selby added: “It might feel a bit ‘un-British’ to talk about vulnerability, but the more open you can be – both socially and with the firms we interact with – the more likely you will get the help and support you need.”
Peter Tutton, head of policy, research and public affairs at StepChange Debt Charity, said: “At StepChange, it’s very common for people struggling with debt to have additional vulnerabilities, in fact over half (55%) of new clients have a vulnerable characteristic in addition to their debt problem – so it’s worrying that so few vulnerable customers are disclosing their needs to their creditors.
“We know many people in vulnerable circumstances face barriers to support, such as fear and anxiety about the consequences of asking for help, not knowing what support is available and mental health problems that make it difficult to cope with their situation and take action.
“It’s encouraging that many customers who reach out for support have positive experiences and this research emphasises why the Consumer Duty is so important; it’s vital the FCA continues to raise expectations of firms to support customers in vulnerable situations.”
Kathryn Townsend, head of customer vulnerability at Nationwide Building Society, said: “It’s understandable that people in vulnerable situations find it hard to speak about their personal circumstances to others, especially to banks and building societies. There can be a fear that they will be penalised in some way, when in fact the opposite is true.
“At Nationwide, we have worked hard to better equip our colleagues in identifying and supporting customers, as well as investing in new technologies, such as the Experian support hub, which allows people to record their support needs online and share it with multiple service providers simultaneously.”
