‘Inside FCA Podcast’ – ‘explaining Consumer Duty outcomes monitoring’
The FCA has just released the latest episode of its ‘Inside FCA Podcast’ entitled ‘explaining Consumer Duty outcomes monitoring’.
We asked Tony Crane – in his role as chair of the ‘Consumer Duty: managing vulnerability’ webinar series – to summarise his view on how vulnerability fits within Consumer Duty’s reporting requirements, on the back of this latest podcast.
First, for those who haven’t heard it, here is a short summary of the podcast. Tony highlighted his key points in terms of vulnerability – as well as some other important quotes from Ed Smith:
Some key points made by Ed Smith, Head of Competition Policy at the FCA:
“Without the information or the evidence, it’s not really possible for firms to know that they’re meeting the requirements under the Duty.”
“We don’t expect them to have all of it on day one. As long as they can evidence good outcomes from day one, but then have a strategy to develop the data that they need to really understand those better in the future, that’s fine and they can work with us.”
“As I said, we have specific guidance around vulnerability, and we definitely do expect firms to consider customers with characteristics of vulnerability in the data they collect.”
The podcast’s main points: (some references from FG21/1 as well):
The FCA expects firms to consider those consumers with characteristics of vulnerability when deciding which information to collect. This includes customers who may be:
Financially vulnerable: these customers may have difficulty managing their finances, such as those who are on low incomes, have poor credit histories, or are struggling with debt.
Emotionally vulnerable: these customers may be going through a difficult time in their lives, such as those who have recently experienced a bereavement, separation, or redundancy.
Cognitively vulnerable: these customers may have difficulty understanding complex financial information, such as those who have learning disabilities or dementia.
Physically vulnerable: these customers may have difficulty accessing financial services, such as those who are elderly, disabled, or live in rural areas.
Firms should also understand the differences in the outcomes across their customer base – and be able to monitor distinct groups of customers to see whether they might be receiving worse outcomes than others. This includes customers from different socioeconomic demographics, geographical regions, or distribution channels.
Firms should also be aware of any differences in prices charged to different groups of customers and satisfy themselves that those differences are both appropriate and provide fair value – noting that the regulation doesn’t insist that all customers are charged the same.
The FCA expects firms to (where they can) include the proactive monitoring of customers’ protected characteristics as part of their wider work but acknowledges that this may not always be possible. Where firms do collect data about customers’ protected characteristics, they should use it as part of their process to monitor differences in outcomes between different groups.
Firms should ensure that they are complying with the relevant legislation, such as the Equality Act 2010 and the Data Protection Act 2018, when collecting and monitoring data about customers’ protected characteristics.
According to Tony, there are specific expectations around vulnerability:
Firms should have a clear understanding of the characteristics of vulnerability which are relevant to their business. This will help them to identify customers who may be vulnerable – and to tailor products and services accordingly.
Firms should collect data on customer outcomes, including data on customers with characteristics of vulnerability. This data can be used to identify any differences in outcomes between different groups of customers and to monitor the effectiveness of firms’ efforts to improve outcomes for vulnerable customers.
Firms should have processes in place to monitor customer outcomes and to identify any potential risks to good outcomes for vulnerable customers. This could include monitoring customer complaints, cancellations, and feedback.
Firms should have procedures in place to address any risks to good outcomes for vulnerable customers. This could include providing additional support to vulnerable customers, such as financial education or debt advice.
Firms should review their policies and procedures on vulnerability on a regular basis to ensure that they are effective. This could involve consulting with customers with characteristics of vulnerability and with experts in the field of vulnerability.
Our thanks to Tony Crane of Crane Consulting.
