FCA’s VULNERABLE CUSTOMERS – FCA’s Rule on Vulnerable Customers


The Financial Conduct Authority (FCA) has defined “vulnerable customers” as individuals who are more susceptible than others to harm as a result of their personal circumstances. These customers may experience difficulties in understanding financial products and services, making informed decisions, or being able to engage with financial institutions effectively.


What Makes a Person a Vulnerable Customer?

There are a variety of factors that could make someone vulnerable, such as age, disability, mental health issues, low literacy, low income or financial exclusions, and past experiences of financial misconduct. The FCA has also identified specific life events that may increase vulnerability, such as bereavement, divorce, redundancy, or a serious illness.


One of the main concerns around FCA’s vulnerable customers is that they are at risk of being taken advantage of or provided with unfair treatment by financial institutions. This could include being sold products that are not appropriate for their needs, having hidden fees and charges added to their accounts, or being subjected to aggressive or misleading sales tactics.


FCA’s Approach to Vulnerable Customers

To address these challenges, the FCA has put in place a number of FCA regulations and guidance around how financial institutions should treat vulnerable customers. This includes requirements around ensuring that information is communicated in a clear and simple way, providing extra support and assistance where needed, and putting in place effective complaints handling procedures.


However, it is important to note that vulnerable customers are not a homogeneous group, and their needs and experiences will vary greatly depending on their individual circumstances. As such, financial institutions need to take a personalised and empathetic approach to working with vulnerable customers, taking the time to understand their specific needs and providing tailored support as required.


Why is the FCA Placing More Focus on Vulnerable Customers?


The Financial Conduct Authority (FCA) has a strategic objective to protect consumers, foster competition and enhance the integrity of the UK financial system. One of its priorities is ensuring that vulnerable customers are treated fairly and receive appropriate protection. Here are some reasons FCA is placing much Focus on Vulnerable Customers.


  • Vulnerable customers can have a significant impact on the wider financial system. If vulnerable customers are sold unsuitable products or placed in debt, it can result in larger societal costs. For instance, debt problems can lead to housing instability, relationship breakdowns, poor mental health, and even homelessness. This can place a significant burden on public services such as healthcare, social care, and housing assistance. By focusing on vulnerable customers, the FCA is aiming to reduce societal costs and create more sustainable financial as well as social outcomes.


  • The regulation of financial firms in the UK requires them to treat all customers fairly. This includes vulnerable customers. In addition, the FCA requires firms to consider the needs of vulnerable customers in product design, pricing, and distribution. By focusing on vulnerable customers, the FCA is ensuring that financial firms are meeting their regulatory obligations and that vulnerable customers receive the same level of protection and fair treatment as all other customers.


  • Focusing on vulnerable customers can help to improve customer outcomes for all customers. The FCA’s focus on vulnerable customers can act as a catalyst to improve the overall standard of conduct in the financial services sector. For example, if firms develop clearer and more understandable products for vulnerable customers, this can also benefit other customers who may struggle with complex financial products.


Wrap Up

Identifying and protecting vulnerable customers is an important responsibility for financial institutions and regulatory bodies alike. By taking steps to ensure that these customers are treated fairly and have access to the support they need, we can help to build a more inclusive and equitable financial system that works for everyone.