The Lending Standards Board (LSB) has published a standards development review into customers in vulnerable circumstances. The review highlights that consumer vulnerability has become one of the key areas of focus for regulators, consumer groups, debt charities and providers of consumer credit. Its research found that whilst most firms are at the beginning of their vulnerability journey, they recognise that vulnerability should be ‘at the forefront of everyone’s minds’ throughout the customer journey, and not something that is confined to debt collection.
In summary, the LSB found:
- There is executive level support and accountability for developing a fair approach to customers with vulnerabilities, supported by clear milestones and reporting lines to the executive which ensures vulnerability remains a corporate priority. However, the LSB emphasise that more could be done at a strategic level to ensure a fair and consistent approach to vulnerability.
- There are a number of best practice guides but more could be done to consolidate guidance and drive consistency across firms. The LSB recommends that the industry should continue to work together through the sharing of best practice as a customer in a vulnerable circumstance may hold multiple products across a number of different financial services firms, and therefore a consistent approach, industry wide, may help minimise customer detriment.
- It is accepted that vulnerability can take multiple forms and that the situation and impact may vary in degrees of permanence. Factors such as low literacy and numeracy skills, mental and physical health, caring responsibilities and life changing events can put anyone in a vulnerable situation, particularly where this affects the customer’s ability to make an informed decision or maintain existing financial commitments.
- All firms had invested in front line training to identify customers who may require additional support, including referrals to specialist teams, where they exist.
- Firms should have mechanisms in place to support customers identified as vulnerable at the point of sale. However, the review stated that as most sales are non-advised it is proving difficult to provide sufficient information to vulnerable customers to make informed decisions without slipping into the realms of implied advice.
- More customers are transacting digitally, which restricts firms from engaging in face to face or telephone contact. The LSB found that this generally sits at odds with most firms’ strategies for identifying and dealing with vulnerability which places a reliance on face to face or telephone contact with their front line teams.
- The fair treatment of customers in vulnerable circumstances is an active consideration at all stages of the customer journey and product lifecycle, though firms could do more to help demonstrate this.