06 May 2021

Vulnerable Customers

How do you identify a vulnerable customer when it comes to financial services?

A vulnerable customer can be defined as:

“A customer who, due to their personal circumstance, is particularly likely to experience financial disadvantage, loss or harm especially when the appropriate level of care isn’t acted upon.”

The six key characteristics of vulnerable customers are:

  1. Poor financial decisions – these customers are more likely to have mistakenly bought a product or service that isn’t appropriate for them because they misunderstand the features or the terms and conditions and can act rashly without thinking decisions through.
  2. Exclusion and disengagement – vulnerable customers are less likely to hold savings, insurance, pensions or investments. If services or products are perceived as too difficult to gain or manage then customers may not look into them and therefore may miss out on opportunities which improve their financial health.
  3. Access to products or services - customers with a disability may find it difficult to use certain channels – for example, a low digital capability may prevent a customer going online.
  4. Over indebtedness – these customers are more likely to fall behind on key household bills or repayments. Life events such as a bereavement, relationship breakdown or ill health can contribute to temporary loss of income and greater risk of debt.
  5. Scams and financial abuse – vulnerable customers are more likely to fall victim to scams. For example, older consumers who may be lonely, and customers who are less likely or able to check their bank account are less likely to spot unusual transactions.
  6. Stress and anxiety - inflexible processes may increase the effort or time it takes for a vulnerable customer to do business with a company - this can increase stress. Poor experiences may increase the stress and confusion a customer may experience when already dealing with unexpected life events or challenging circumstances.

If you’re in a customer-facing role where you might deal with a potentially vulnerable person, it’s important to keep these characteristics in mind. For more information and guidance, visit www.fca.org.uk/firms/treating-vulnerable-consumers-fairly