A thought piece from Richard Farr, Telos Solutions, and Adrian Golifer, Create Solutions - both members of the Association of Professional Compliance Consultants (APCC) Vulnerability Working Group.
Background
At the end of February 2023, Sheldon Mills, FCA Executive Director, Consumers and Competition, used a speech to send a message to the industry that some firms are trying to avoid the Consumer Duty [1] (‘the Duty’).
The vulnerability working group at the APCC undertook a thought experiment to explore and understand this issue: can firms reasonably avoid the requirements of the Duty, on the premise that any customer with a vulnerability characteristic should receive the same outcome as any other customer?
The initial question posed was: “consider a firm that is prepared not to do business with a vulnerable customer (let's say English isn't their first language) and is only prepared to suggest they use another firm?”
Debate
Not surprisingly, a healthy debate ensued! Some consultant members argued that the firm would preserve the best outcomes for the customer by referring to another firm that could satisfy their need(s).
Against that, other members said that it would be relatively easy to meet the customer's need(s) by, for example, asking a friend or family member to help translate or even by using the plethora of free translation tools on the internet.
The group then broadened the experiment to suggest that the firm had no expertise in dealing with, for example, bereavement or divorce and, consequently, had to refer the business to another firm.
Thin end of the wedge
It became apparent that any argument about not having expertise in a particular vulnerability could be the thin edge of the wedge. If this argument were valid, any firm could seek to avoid its obligations under the Duty by referring certain types of customers to other firms, claiming it is not an expert in dealing with vulnerability matters. Such a result could not be acceptable to FCA.
Forcing this experiment to its conclusion demonstrates that firms must make reasonable efforts to serve customers who have chosen to come to them. Indeed, one of the fundamental overarching regulatory expectations of the Duty is to “Act in good faith towards retail customers”[2].
Conclusions
The group concluded that, as a first step, firms should try to make allowances for any apparent vulnerabilities. It would be appropriate to refer to another firm only when these ‘reasonable’ allowances have been exhausted.
Firms should also remember that when referring a customer to another firm, they are responsible for ensuring that the other firm has sufficient and appropriate levels of expertise in meeting the customer's needs and objectives.
Summary
So in summary, the vulnerability working group believes there is no “get out of jail free card” for firms looking to avoid their obligations under the Duty.
It recommends that firms:
introduce customer-facing vulnerability assessments,
provide staff with vulnerability awareness training, and
capture sufficient data to demonstrate they are fulfilling the regulatory expectations that customers in vulnerable circumstances receive an equally good outcome as any other customer.
[1] FCA speech dated 22nd February 2023: ‘Call of Duty: How putting customers front and centre will help industry innovate’ https://www.fca.org.uk/news/speeches/call-duty-putting-customers-front-centre-industry-innovate
[2] FCA PS22/9 ‘A new Consumer Duty’; 2A.2 Cross-cutting obligations https://www.fca.org.uk/publication/policy/ps22-9.pdf