Rachel Cairnes, policy and public affairs adviser at the Association of Consumer Support Organisations (ACSO), responds to the Financial Conduct Authority (FCA) consultation 'GC20/3 Guidance for firms on the fair treatment of vulnerable consumers'.
The response focused on the fair treatment of vulnerable consumers who, for a number of reasons, become claimants in the civil justice system.
Cairnes stated, "within this context, a consumer is likely to be vulnerable due to the reasons they are making a claim. For example, a claim may be made against the cover provided by a motor, home or travel insurance policy. This may mean that a consumer have been involved in a road traffic accident, has been recently bereaved, has suffered damage to their home, or has become ill or injured abroad. In terms of the drivers of vulnerability outlined by the FCA, all categories could be relevant depending on the circumstances and causes of the claim.
"The subject of consumer vulnerability is broad and multifaceted. Disruptive technologies, regulatory reform and changing consumer preferences affect how and when consumers are at risk of becoming vulnerable. For this reason, the FCA is correct in its description of vulnerability as "a fluid state that needs a flexible, tailored response from firms". In order to keep abreast of these changes, and to ensure effective consumer protections are in place, we welcome both the FCA's intention to monitor how firms respond to the Guidance over the next two years, and the wider evaluation planned for 2023. However, [...] we urge the FCA to review the Guidance on a regular, long-term basis (beyond 2023) in order to ensure the changing market does not leave consumers at risk of detriment.
"Overall, the FCA's Guidance is sensible and proportionate. We agree with the FCA that the prescription of cross-sector minimum standards could create a 'levelling-down effect' or a 'tick-box' mentality within firms. This would do little in helping to generate a culture in which vulnerability is taken seriously by firms. It is right that the responsibility rests with individual firms to implement policies and programmes that ensure the fair treatment of consumers in a way that corresponds to their customer base, size and business model.
"[A]ll consumers can be put into a position of vulnerability as a result of the incident following which they are making a claim in the civil justice system. For this reason, we support the FCA's continued focus on ensuring firms treat vulnerable consumers fairly and consistently across all financial services sectors. Firms' differential treatment of consumers directly contributes to low satisfaction levels and continuing mistrust of financial services providers. This represents a significant challenge to the wider sector and one that risks being exacerbated as a result of the coronavirus pandemic."
ACSO members can read the submission in full on the Members' Area of the website, here.