The FCA recently published its approach to consumer protection document setting out how it achieves its consumer protection operational objective.
We have set out key points of consideration below.
Unregulated activities
The FCA reiterated that although their focus is primarily on supervising regulated activities, when advancing its consumer protection and effective competition in the interest of consumers objective, it will also take into consideration the conduct of a firm’s unregulated activities and how it impacts consumers. The FCA noted that its Principles for Businesses apply to firms regulated and unregulated activities. Where the FCA establishes that a firm’s unregulated activities are causing consumer detriment it can refer matters to other bodies that have relevant responsibilities over those unregulated areas.
High risk areas
The FCA identified the following as high-risk areas in respect that threaten its consumer protection operational objective:
• Firms exploiting consumers’ behavioural biases or vulnerabilities; and
• Consumers suffering harm as a result of scams or unauthorised firms.
It is imperative that that firms do not build business models that seek to capitalise from consumer vulnerability or lack of financial education or awareness.
Policies
The FCA expect firms to pay attention to indicators of potential vulnerability and to have policies in place to deal with consumers who may be at greater risk of harm.
Firms are reminded that a vulnerable consumer is defined as someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care.
The FCA set out that vulnerability is usually attributed to the following drivers and firms should be conscious of this when engaging with vulnerable customers. The four drivers of vulnerability are as follows:
• Health – health conditions or illnesses that affect the ability to carry out day to day tasks.
• Resilience – low ability to withstand financial or emotional shocks.
• Life events – major life events such as bereavement or relationship breakdown.
• Capability – low knowledge of financial matters or low confidence in managing money.
Firms should ensure that its vulnerable customers’ policy are up to date with current FCA views on consumer vulnerability and that staff are trained on the firm’s up to date policy.