A vulnerable consumer is someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.
I don’t believe that every vulnerable consumer ‘is especially susceptible to detriment’, and therefore firms need to think sensitively but look carefully at the person they are dealing with. I think this definition is narrow in its scope and so leaves little room for wider considerations of an individual’s credit profile, and importantly their circumstances.
One thing we do know is that consumer vulnerability can be presented in a variety of scenarios ranging from effects of the COVID-19 pandemic, mental health issues, terminal illness, shock vulnerability such as divorce, loss of job, or even an unexpected bill which affects a consumer’s monthly disposable income.
As a result, there cannot be one approach to managing vulnerable consumers. Of course, firms must not discriminate in their treatment of consumers, but equally should avoid falling into the trap of making assumptions. Showing patience may not be appropriate for all vulnerable consumers.
Just because an individual has a mental health issue, does not necessarily mean that they cannot afford to repay a loan or understand the information being provided to them.
The FCA has provided some insight into what a ‘good’ firm looks like when dealing with vulnerable consumers within its Occasional Paper 9, and this certainly helps in developing high level processes. However, this paper doesn’t indicate how firms should be identifying vulnerable consumers.
So what can we do? Firstly, and most importantly to me, no two consumers should be treated the same. Vulnerability cannot be pigeon-holed in categories whereby certain demographics are handled in specific and defined ways. Each consumer must be listened to, treated with empathy and ultimately dealt with appropriately in accordance with their own circumstances.
Tools to help you care at scale
There are lots of excellent tools which have been developed to help front line staff manage these situations, such as the TEXAS model or IDEA protocol.
Bristol University, together with Money Advice Trust, conducted a study into how businesses deal with consumers in vulnerable situations. Vulnerability: a guide for debt collection contains 21 steps to assist businesses. This is one of the most helpful and comprehensive documents of its type and can certainly provide some good guidance tips for firms.
Together with ‘Affordability’ and ‘Suitability’, vulnerability is one of the FCA’s hottest topics and one which all firms who deal with consumers on a regular basis should take extremely seriously.
Systems and controls should be implemented, as well as specific and considered training for all front-line staff. It may also be appropriate to seek external advice and guidance; the Samaritans, Stepchange and Payplan all provide support to firms dealing with vulnerable consumers on a regular basis.
Vulnerable consumers will always be with us. At any point in their lifetime an individual can experience some difficulty in personal, health or financial circumstances and it should be expected that firms are geared up to support these consumers.
Firms that take a closer look at their approach and processes are also likely to be in a strong position to integrate any new rules that come from the latest FCA consultation into high-cost credit.
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