Key takeaways from the FCA’s vulnerability review

Most people’s idea of a fun Friday morning wouldn’t be reading through a review from a financial regulator of guidance they introduced several years ago. But this is Money and Mental Health and that’s exactly what I was up to last week! 

That’s because this guidance is about how financial service providers, like banks, lenders and insurers, should treat customers in vulnerable circumstances, which can include mental health problems. Given the challenges that we know people with mental health problems face when accessing financial services and interacting with providers, guidance like this from the Financial Conduct Authority (FCA) has the potential to make a real difference.

Since the guidance was launched, the FCA also introduced a big piece of regulation called the Consumer Duty. This aimed to drive up standards in financial services. So the FCA wanted to understand what firms have done to meet the guidance and what impact it had on the experience and outcomes of consumers. 

Like most reviews, they found some good practice but also areas to improve. So what do we think?

One of the main areas of the review was how firms can encourage and respond to customers who want to disclose their circumstances and needs. The FCA found that some firms were providing training for frontline staff to help with this, while others weren’t responding with the right care. Research they commissioned showed that only four in ten (42%) of customers in vulnerable circumstances had disclosed them to their financial service provider. Of those, 57% felt their provider cared and 58% said their provider made changes as a result. This means there’s still lots of customers in vulnerable circumstances not disclosing and not being treated well when they do. 

Disclosure is a key part of our work and the FCA’s findings reflected our own past research. We found low numbers of people disclosing their mental health conditions and not always getting the support they need. The FCA’s review highlighted that the barriers to disclosure we have identified, like stigma and concerns over how the information will be used, still remain. 

When products, services and systems aren’t designed with the needs of customers in vulnerable circumstances in mind, outcomes for this group can be worse.

For example, we know many people with mental health problems can struggle to use communication channels, like the phone, to get in touch with their provider. In this case, the FCA highlighted that providing appropriate and accessible channels as an area for firms to improve. Having the phone as the only way to speak to your loan provider when you can’t make repayments means people might never get the help they need.

The FCA’s review highlighted that firms need to make improvements in how they measure the outcomes between customers in and those not in vulnerable circumstances. But the review also suggested that customers in vulnerable circumstances are still getting worse outcomes. For example, in the FCA’s research, more than four in ten (44%) customers in vulnerable circumstances had a negative experience with a financial services provider compared to a third of customers not in vulnerable circumstances.

It’s easy with reviews like this to focus on the negative, but there have been lots of improvements over the last few years in how customers with mental health problems are treated by financial service providers. The review highlighted examples of good practice, and it is encouraging to see firms taking these practical steps.

Several leading banks and building societies have worked with us through our Mental Health Accessible programme or are part of our Gambling Harms Action Lab. Working with charities like ourselves was flagged as good practice in the review. We want to see this action replicated across financial services so many more customers can benefit. 

Beyond what firms should be doing, we also think the FCA should continue to keep an eye on this area. In particular monitoring whether firms are making the changes needed and whether outcomes for customers in vulnerable circumstances improve. If they don’t, the FCA needs to step in and act decisively. 

If you work for a financial service provider and want to understand how to best support customers with mental health problems through Mental Health Accessible get in touch with our Head of Strategic Partnerships Bronwen Dalley Smith.