Consumer vulnerability in the UK has received a great deal of attention over the last few years. It's especially important in times of disruption or change.
In particular, the financial services sector took a front-line approach when the FCA announced its paper on this subject back in early 2015. But it’s by no means the only regulator focusing on this issue.
Energy companies continue to receive a lot of attention from their regulator, Ofgem, about how they treat their customers who might be vulnerable or showing signs of vulnerability. An Ofgem report showed that there’s still more work for the industry to do in terms of helping out those customers who are either building up levels of debt or who are starting to repay excessive debts. This is a particular area for energy customers where vulnerability is exposed, but it’s by no means the only one.
So, before going any further, two questions need to be asked. Firstly, what exactly is vulnerability, and secondly, why should it matter?
Definition of vulnerable customers
The work carried out by the FCA, particularly its collaboration with other bodies across the industry and the non-profit sector, has been pivotal in pushing the understanding of vulnerability to a whole new level.
The regulator has proposed a definition of vulnerability, like when a consumer finds themselves in a position where they’re susceptible to detriment by either making inappropriate decisions or being led into positions that aren’t beneficial to them due to a lack of care by service providers.
There are two important aspects that businesses need to take note of:
- Consumers may come to them in a state of vulnerability; and
- Businesses can make this worse - or better.
It’s the latter point in particular that needs to be understood – the reaction of businesses when faced with a vulnerable customer can make all the difference, depending on how they handle that customer.
But first, vulnerability needs explaining a bit more.
Types of vulnerable customers
The FCA paper is very good at setting out the different ways in which vulnerability can manifest itself. And the results are surprising.
First of all, businesses need to understand the short-term nature of vulnerability in many cases. Someone who’s just had a bad accident and is in the process of recovering; someone going through a painful divorce; a person who’s grieving the loss of a loved one; the parent who’s just lost their job and is worried about how they’re going to provide for their family. These people may not display symptoms of vulnerability all the time, but they’re doing so at that time because of these particular events.
Some are vulnerable for a long-term and often permanent reason. Disability, both physical and mental, is the obvious one here, but others have become long-term carers or have had to take responsibility for someone’s personal affairs; through a Power of Attorney. Both these situations put pressure on people, making them potentially vulnerable under the strain of caring for someone else.
Then we have those who, for whatever reason, may not have a standard of education high enough to enable them to understand the types of products or services that would be best suited to them. This is a particular issue in financial services, where products are complex by nature. Still, competition in the energy market, with different tariffs and plans, shows that more choices are available to people now than in the past. This has the potential to cause confusion and a level of complexity many can’t understand.
Which is where you come in.
Consequences of mistreating vulnerable customers
The focus from regulatory bodies on this subject is closer and more intense now than ever before. Customers who demonstrate a degree of vulnerability have to be looked after. They have as much right to be treated with respect and not taken advantage of, like any other customer.
Businesses now have no choice but to demonstrate they can identify the signs of vulnerability and respond appropriately and sympathetically. Failure to do so could result in not only a loss of reputation but the unwanted focus from regulators too.
Danske Bank suffered a PR nightmare
Internal documents leaked to media outlets revealed that Danske Bank trained its employees to encourage indebted customers to sell via the bank's own real estate broker at an above-average fee.
An internal investigation found that customers were each overcharged an average of 28,800 kroner (£3,450), totalling 64.6m kroner (£7.75m) in overpayments.
Commenting on the case, Lars Krull, a banking expert attached to Aalborg University, stated, "It's tasteless in its entirety. Business procedures must, of course, be in order and legal, and the customers' overall interest must be taken care of without the bank's interest in its own earnings."
So, what can your business do?
Creating a vulnerable customer policy
The most important thing you can do is ensure that you have a policy for dealing with vulnerable customers. It needs to achieve the best outcomes for these customers and that everyone in the organisation understands it.
The next step, and arguably the most important one, is making sure everyone is trained to handle vulnerable customers in a way consistent with this policy.
For instance, when dealing with an angry customer, is that person able to understand that there may be a vulnerability driving that anger? Perhaps it’s borne of frustration, of not understanding the situation. It could result from a stressful event, or maybe someone has a disability that impairs their ability to express themselves clearly.
All of these factors need to be taken into account in what is a complex area. But it’s the ability to empathise with the customer, to not jump to conclusions about their situation, and to have the knowledge and understanding of different vulnerability scenarios that will ensure your business’ reputation is enhanced, as opposed to being damaged, by doing the right thing for those in our society who need help the most.
Vulnerable Customers Checklist
- Do you have a policy on consumer vulnerability? (Yes/No)
- Have you identified the most likely areas where your customers could display vulnerability? (Yes/No)
- Do your customer service staff understand the different types of vulnerability? (Yes/No)
- Have you conducted a review of how you’ve handled vulnerable customers in the past? (Yes/No)
- Have you identified different types of vulnerability through your customer complaints? (Yes/No)
- Can you identify individual customers who are vulnerable so that they can be treated appropriately in future? (Yes/No)
- Have your customer-facing staff received training in how to handle vulnerable customers? (Yes/No)
If the majority of your answers to these questions is no, you’ll likely need to do some work to make sure you’re meeting both the public and regulators’ expectations for dealing with vulnerability, which will have been heightened by the increased level of awareness of the topic.
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