Financial companies are not meeting the needs of vulnerable consumers, says City Watchdog

The Financial Conduct Authority said the industry needs to start thinking about solutions to these challenges

Vulnerable consumers are defined as those with poor literacy skills, those who have caring responsibilities, people with disabilities, dementia or the old (AFP/Getty)

There are "problems at every stage" in the way financial companies deal with vulnerable consumers, the City Watchdog warned today.

The Financial Conduct Authority said services, products and systems are "not designed to meet non-standard needs of those who don't fit into a set mould".

It warned that vulnerable consumers risk withdrawing from the mainstream market, which could lead to their "problems to spiral if their needs are not met".

"We all know somebody in a vulnerable situation and we can expect the number of people who find themselves in those circumstances to grow over the coming years," warned Martin Wheatley, chief executive of the Financial Conduct Authority.

He said the industry needs to start thinking about solutions to these challenges. "Whether it is accessing funds or securing a repayment holiday, we will work collaboratively with firms to identify what inclusive policies could look like and how best we can create the right outcomes for those consumers,” he said. “It’s a challenge for regulators and firms alike."

Vulnerable consumers are defined as those with poor literacy skills, those who have caring responsibilities, people with disabilities, dementia or the old.

The FCA found that most problems relate to poor communication. It warned that customers are overwhelmed by complex information, often finding it difficult to distinguish between promotional material and important messages about products.

It said frontline staff were not well enough trained to have a "proper conversation" and to know how to refer customers on. Worse, some firms had been "overzealous" in implementing rules, such as those around data protection and affordability, preventing them from meeting the needs of vulnerable customers.

Instead they need to be more flexible when they apply terms and conditions and ensure workers understand policies designed to combat financial abuse and fraud.

In short financial companies must introduce a "high-level policy on consumer vulnerability" including displaying clear and simple information and explaining products for as long as they are used by customers.

Despite the criticism, Eric Leenders, executive director of retail banking at the British Bankers Association, claimed that banks are doing all they can to help vulnerable people. "The prevailing emphasis has shifted from developing dedicated products to focussing on much more empathetic standards of service, but this isn’t always an easy issue to get right," he said. "For example, some people do not feel very comfortable talking about very personal issues like illnesses with people they don’t know well – and sometimes a bank’s best intentions can come across as intrusive."

But Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, said: "There is a real opportunity here for the financial services industry to take a lead in this crucial area, and set an example for other sectors to follow."