STANDARDS DEVELOPMENT REVIEW

CUSTOMERS IN VULNERABLE CIRCUMSTANCES

April 2016

The Lending Standards Board Limited, Company Limited by Guarantee, Registered in England & Wales, No 3861859. Registered Office: 21

Holborn Viaduct, London EC1A 2DY

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Table of Contents

Background ......................................................................................................................................... 3

Existing Guidance on Vulnerability ............................................................................................ 4

Executive Summary ........................................................................................................................ 5

Findings ................................................................................................................................................ 6

1. Culture ........................................................................................................................................ 6

2. Defining vulnerability ............................................................................................................ 7

3. Staff training ............................................................................................................................. 8

3.1. Front line staff vs. specialist teams ................................................................................ 8

3.2. Listening for triggers .......................................................................................................... 10

4. Vulnerability and Mental Capacity .................................................................................. 10

5. Driving a consistent approach across all channels .................................................. 12

6. Proactively identifying vulnerability - existing account holders ......................... 12

7. Exploring the Link between Scams and Vulnerability ............................................. 13

8. Supporting your colleagues .............................................................................................. 14

9. Developing an Industry-wide approach through external collaboration ......... 15

10. Customer Lifecycle - Product Design............................................................................. 16

11. Collections ................................................................................................................................ 16

12. Debt sale .................................................................................................................................. 17

13. Data protection ...................................................................................................................... 18

14. Raising flags and Single Customer View ...................................................................... 19

15. Accessibility and Financial inclusion ............................................................................... 19

16. Monitoring ................................................................................................................................ 20

17. Management Information .................................................................................................. 20

Next steps ......................................................................................................................................... 21

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Background

Consumer vulnerability has emerged as one of the key areas of focus for regulators,

consumer groups, debt charities and providers of consumer credit. In February 2015, the

Financial Conduct Authority (FCA) published its occasional paper on consumer

vulnerability to broaden understanding of the issue and offer guidance to firms in

developing a vulnerability strategy. This resulted in the setting up of the BBA financial

services vulnerability taskforce, the final recommendations from which were published in

February 2016. The Lending Standards Board (LSB) published a report in 2014, following

a desktop exercise which included a review of the policies and procedures employed at

15 subscribers, for the identification and management of customers with mental health

problems, and those classified more widely as vulnerable.

The LSB undertook further analysis on the information submitted as part of this review

to identify areas of good practice, which we published in November 2014. This paper

identified over 49 categories of vulnerability across firms, based on factors such as:

individual characteristics, circumstance, and mental and physical ability, and highlighted

the need for a consistent definition and approach across the financial services sector.

This was based on an understanding that a customer in a vulnerable circumstance may

hold multiple products across a number of different financial services firms, and

therefore a consistent approach, industry wide, will help minimise consumer detriment.

The treatment of customers in vulnerable circumstances, at all stages of the product

lifecycle, is critical – starting with the culture and business model of a firm, the design

and targeting of a product or service and its promotion and sale, through to the ongoing

product and account servicing relationship with the customer, taking account of any

change in circumstance, including any debt collection or debt sale activity. We recognise

that inclusive financial services are, in general, good for all consumers, and that there is

an inextricable link between financial exclusion1 and vulnerability.

With this in mind, the objective of this development review was to understand how firms

identify customers in vulnerable circumstances wherever they may be in the ‘customer

journey,’ and the support and guidance that is offered. We achieved this by identifying

and assessing the key controls firms have in place from product design through to

collections to identify, capture and respond to vulnerability, which included:

How firms define vulnerability, in particular how the degree of permanence of a

particular vulnerability is taken into account;

How vulnerability is identified and, once identified, the support and guidance

offered, and the barriers firms face in managing customer outcomes;

The process for recording sensitive information and the adequacy of systems to

record and share information compliantly, including the use of system flags;

The adequacy of staff training in the frontline and where relevant specialist

teams;

The extent to which internal systems, policies and processes allow for a flexible

and tailored response to take account of individual customer circumstances; and

1 More generally, but specifically in relation to lending

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Evaluating the level of monitoring and reporting that takes place to assess the

effectiveness of the policies, processes, training and controls in place.

Our approach has been research-based, consisting of management discussions at six

firms, including one associate subscriber, interviews with front line operational staff,

followed by a desk top review of information, with the overall aim of identifying and

sharing good practice across the industry, with practical suggestions for consideration

within the Code. We supplemented this with informal discussions at a number of other

subscribers.

Existing Guidance on Vulnerability

There are a number of existing good practice guides in place, these include:

the FCA’s Occasional Paper on Vulnerability;

BS 18477 guidance on Inclusive Service Provision;

Money Advice Trust and Royal College of Psychiatrists 12 steps for treating

potentially vulnerable customers fairly.

Whilst firms derive clear benefit from these guides, it was felt that many of them were

duplicative and that more could be done to help consolidate them and drive

consistencies in practice.

We recognise that there is no room for prescription in this area and that the revised

Code should consider establishing a set of desired outcomes on vulnerability,

underpinned by detailed guidance, with clear and practical examples to demonstrate how

these outcomes might be achieved. There are, however, clear benefits of having an

independently monitored code to enhance standards and help achieve consistency across

the industry in the area of consumer vulnerability to ensure the delivery of fair customer

outcomes.

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Executive Summary

Consumer vulnerability has become one of the key areas of focus for regulators,

consumer groups, debt charities and providers of consumer credit. Our research found

that whilst most firms are at the beginning of their vulnerability journey, they recognise

that vulnerability should be at the ‘forefront and conscience of everyone’s minds,’ at

every stage of the customer journey, and not something that is confined to debt

collection.

o We found that there is executive level support and accountability for developing a

fair approach to dealing with customers in vulnerable circumstances, supported

by clear milestones and reporting lines to the executive which ensures

vulnerability remains a corporate priority, but that more could be done at a

strategic level to ensure a fair and consistent approach to vulnerability, across the

firm, irrespective of the distribution channel the customer chooses to engage.

o Recognition that there are a number of good practice guides but that more could

be done to help consolidate guidance and drive consistencies in practice. The

industry should continue to work together through the sharing of best practice as

a customer in a vulnerable circumstance may hold multiple products across a

number of different financial services firms, and therefore a consistent approach,

industry wide, may help minimise customer detriment.

o It is accepted that vulnerability can take a number of different forms and that the

situation and impact may vary in degrees of permanence. Factors such as low

literacy and numeracy skills, mental and physical health, caring responsibilities

and life changing events can put anyone in a vulnerable situation, particularly

where this affects the customer’s ability to make an informed decision or maintain

existing financial commitments.

o All firms had invested in front line training to identify customers who may require

additional support, including referrals to specialist teams, where these exist.

o Firms should have mechanisms in place to support customers identified as

vulnerable at the point of sale, but as most sales are non-advised, there is a

challenge in ensuring that the customer is given sufficient information to help

make a balanced and informed decision, without slipping into the realms of

implied advice.

o Statistics show that more and more customers are transacting digitally, limiting

opportunities for firms to engage in face to face or telephone contact. We found

that this generally sits at odds with most firms’ strategies for identifying and

dealing with vulnerability which places a reliance on face to face or telephone

contact with their front line teams.

o The fair treatment of customers in vulnerable circumstances is an active

consideration at all stages of the customer journey and product lifecycle, though

firms could do more to help demonstrate this.

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Findings

Our findings are based on the outputs from discussions held at those firms who

contributed to this research: references to ‘all firms’ refers, therefore, to those firms we

reviewed.

1. Culture

The key commitments in the Lending Code require firms to act ‘fairly and reasonably in

all dealings with customers’. The scope of the Code currently limits this to loans, credit

cards and current accounts with an overdraft facility, and the debt collection activities

associated with these products. Principles 6 and 7 of the FCA’s principles for business

require all firms to demonstrate the delivery of fair customer outcomes, by establishing a

business model and culture that is conducive to the fair treatment of all customers

including those in vulnerable situations. Whilst the industry has worked to develop

conduct risk frameworks, the weaknesses identified in the FCA’s occasional paper

suggest that for those customers, whose personal circumstances ‘do not fit the standard

mould,’ and require additional support, there is still some way to go.

Our research found that there is executive level support and accountability for

developing a fair approach to dealing with customers in vulnerable circumstances. This

has resulted in several firms establishing formal projects, with executive sponsorship and

funding to review, evaluate and strengthen their vulnerability strategy to ensure

alignment across the firm. This is supported by clear milestones and reporting lines to

the executive which ensure vulnerability remains a corporate priority.

Good practice

Setting up a Formal Project on Vulnerability:

One firm has established a formal taskforce on vulnerability with senior level representation,

which ensures that there is senior level accountability for any actions that are agreed and

progressed. The taskforce meets quarterly, and the outputs discussed at senior fora, via the

Conduct Risk Committee.

Developing your Conduct Risk Framework to Capture Vulnerability:

Vulnerability should be captured through firms’ conduct risk frameworks. One firm has developed

target customer outcomes, with one, specific to vulnerability. Performance against each outcome

is tracked through leading and lagging appetite measures and captured and reported within the

Conduct Risk Dashboard.

Conducting a Deep Dive:

The board at one firm has requested a deep dive into vulnerability across key parts of the

customer journey, recognising that vulnerability is not just something that is considered at the

latter stage of a process, but is something that is reflected in the design of a product or service

and the entire customer experience.

Collaborating with Charities:

Firms could consider trying to identify any issues or concerns highlighted by charities and

government organisations, around vulnerability and financial inclusion and working with them to

plug these gaps based on customer needs and to develop an inclusive service to benefit all

customers.

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2. Defining vulnerability

The FCA defines a vulnerable customer as, ‘someone who due to their personal

circumstance is especially susceptible to detriment, particularly where a firm is not

acting with appropriate levels of care.’

This definition is broad, but acknowledges the strong interplay between individual

circumstance, situation and the actions and processes of firms, placing a responsibility

on firms to establish policies, processes and controls which ensure the fair treatment of

customers in vulnerable circumstances, at every stage of the customer journey.2 Our

research found that all firms have made progress in this area, demonstrated through:

the investment in staff training, the evaluation and review of vulnerability strategies, and

building and strengthening the relationships with third sector organisations.

How firms define vulnerability

It is accepted that vulnerability can take a number of different forms and that the

situation and impact may vary in degrees of permanence. Factors such as low literacy

and numeracy skills, mental and physical health, caring responsibilities and life changing

events can put anyone in a vulnerable situation, particularly where this affects the

customer’s ability to make an informed decision, or maintain existing financial

commitments. For these reasons, vulnerability should not be viewed as a static state

limited to a certain group of people.

This is supported by an understanding that whatever the vulnerability, the way in which

a person might handle or respond to a situation can vary, based on personal

circumstance and individual characteristics such as: levels of resilience, the availability of

support networks and, in the case of a medical condition, the impact and extent of their

symptoms. This is because every individual is unique and should be treated as such.

The way in which a person handles a situation could mean that for some there is no

personal or financial impact at all, or that there are good days and bad days, where the

impact is particularly heightened. This should serve as a reminder that not everyone

going through a vulnerable situation is automatically vulnerable and that there is a

greater need to understand the customer’s circumstances. Whilst this approach is

reflected in the training that is delivered to front line staff, firms should continue to build

the structures and processes to allow staff to investigate situations fully, and equip them

with the knowledge, confidence and skills to question and explore circumstances

appropriately, with a view to identifying impact and likely support needs.

2 Customer journey includes: product design, sales, credit assessment, account servicing and maintenance, pre-arrears,

collections and complaints.

When considering impact, firms should have regard to:

the customer’s state of mind, and their ability to understand key product features

and risks, and make informed decisions both in relation to new applications and

reviewing the suitability of existing products held; and

the customer’s finances, focusing on their ability to manage existing commitments,

and the impact the situation may have on current and future income and

household expenditure, and the customer’s ability to maintain their contractual

repayments.

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3. Staff training

All firms are in the process of rolling out firm-wide training on vulnerability for

employees in front line and back office functions. This is achieved in some instances

through:

o a dedicated induction programme, with a specific module on vulnerable

customers, supported by a discussion of a document containing case studies

based on ‘real life’ customer encounters, covering vulnerabilities which range

from accessibility issues through to mental capacity. Staff are encouraged to

document the action they would take, with an indication of the actual outcome,

with reference to policy and procedural guidance;

o The development of a bespoke computer based training module on vulnerability,

using scenarios to increase understanding of the different types of vulnerability

and the corresponding needs of customers, to highlight the fact that vulnerability

should be an active consideration in the execution of everyone’s role, which is

refreshed on an annual basis;

o hosting a bank-wide well being event, inviting key speakers from third sector

organisations to provide insight on what they do and the support they can offer

customers.

Whilst this is positive in raising general awareness of vulnerability across firms and helps

minimise the policy and practice gap, it also serves as a reminder that vulnerability is

not just something to be considered at the collections stage but as something that is

integral to the customer journey.

3.1. Front line staff vs. specialist teams

All firms have dedicated specialist teams to support customers in vulnerable

circumstances, though in most cases these have been established in collections and set

up to deal with customers in financial difficulties. Whilst all firms recognise that the

impact of vulnerability in relation to problem debt may be particularly acute, there is also

an acceptance that not all customers in a vulnerable situation are in financial difficulties.

This is based on an understanding that vulnerability can occur at any stage in the

customer journey.

This has led to several firms developing role specific training on vulnerability for their

front line sales and account servicing teams; however the structure and remit of these

teams varied across firms:

o Some firms have trained their front line staff to serve as ‘listening posts,’ to

identify indicators of potential vulnerability, seek explicit consent to record and

share sensitive data and refer to a dedicated specialist team for more bespoke

Good practice

Vulnerability should be at the forefront and conscience of everyone’s minds, at every stage of the

customer journey, from the point at which a product or service is designed, right through to

account servicing, collections and complaints, having regard to the customer experience.

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support and assistance. Staff members in the specialist team are often trained to

an enhanced level and have the discretion to offer a tailored service based on the

customer’s individual circumstance, and are set up to be devoid of any policy or

process constraints.

o Other firms felt that the category of potentially vulnerable customers is so wide

that there are implications for the handling and care of all customers. For these

reasons it has been considered practical to train all front line staff to an enhanced

level to identify and support customers in vulnerable situations and to treat all

customers with equal levels of care and diligence. This is supported by formal and

informal escalation routes to operational, legal and regulatory risk teams for

further guidance and support for more complex cases, though responsibility for

dealing with the customer continues to reside with the front line teams.

Whilst there are clear benefits in training all staff to manage vulnerability, some firms

felt that having a dedicated specialist team, with greater levels of training, knowledge

and the flexibility to make decisions ensures a better customer experience. This also

means that the contact centres are able to respond more efficiently to inbound calls from

customers, which helps reduce customer call waiting times. The Code does not require

firms to establish a specialist team to deal with vulnerability, but where there are

specialist teams in place, firms should ‘ensure appropriate mechanisms exist to refer the

customer to appropriate support.’3

We consider this decision to be commercial; but the outcome should be that customers

have easy access to specialist support to help them. As firms develop their strategies,

there is merit in evaluating the benefits of both approaches to ensure that the firm has

fair and efficient structures in place, designed to suit its business model (taking into

account resourcing and capacity), to manage those customers identified as requiring

further support. In all cases, staff should be encouraged to exercise discretion, thinking

practically about the implications of their actions, being guided by their determination to

resolve a situation, and deliver a fair customer outcome. This could then be reflected in

the firm’s recruitment strategy and balanced by appropriate targets and measurement

systems which support the fair treatment of customers in vulnerable circumstances.

3 245- If a subscriber has specialist staff to deal with cases of debt and mental health problems, they should ensure that

appropriate mechanisms exist to refer the customer to the appropriate support.

Good Practice

One firm has recently extended the remit of its existing and established specialist team to accept

referrals from customers who are up to date with payments but require support. This is

accompanied by training to raise awareness of the specialist team across the firm, which has

resulted in increased levels of referrals to the team. This team is also responsible for providing a

chaperone service, offering a single point of contact for customers identified as vulnerable. This

means that issues requiring resolution across departments are coordinated via the specialist team

through a ‘tell us once’ approach.

Firms have the ability to raise education gaps to their team manager depending on what they see,

which helps inform the education programme and engagement with charities; for example, if

there is a peak in calls from customers who are highlighting that they are depressed, this may

result in the firm engaging with the likes of MIND to further develop their training.

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3.2. Listening for triggers

We saw evidence of more targeted training for front line staff which involves educating

staff on potential vulnerability triggers and customer impact. Training is often based on

information volunteered by the customer during conversations such as ‘I am in receipt of

a disability allowance’, ‘I have been off work’, ‘my income has reduced significantly, I

cannot cope,’ and softer behavioural triggers, which, whilst not obvious, may indicate

that the customer requires further support. This includes: signs of agitation, tone of

voice, questions which indicate the customer does not understand what is being

explained and placing reliance on a third party for support, where there are no existing

mandates or authorities in place. Whilst we recognise that not every trigger may result

in a customer being identified as vulnerable, they are clues which should be probed and

explored further to encourage a complete understanding of the customer’s situation,

based on a ‘tell us once’ approach.

Whilst training on the different types of vulnerability is key, the importance of softer

skills such as the ability to listen, empathise and question is critical to a successful

vulnerability strategy. This is reinforced by the fact that not all customers will be

forthcoming with information, particularly at acquisition, as there is a fear that this may

adversely impact the customer’s ability to apply for credit.

4. Vulnerability and Mental Capacity

Guidance in CONC 2.10.12 provides that where:

‘a firm understands or...suspects, a customer has or may have a mental capacity

limitation, the firm should use its business practices and procedures to...assist the

customer where possible to make an informed borrowing decision...’

In practice we found that firms have broadened this requirement to include any

circumstance which has the potential to impact the customer’s ability to make an

informed borrowing decision. We endorse this approach as it is clear that the stress

associated with being in a vulnerable situation may have an adverse effect on a person’s

emotional state and cognitive ability. This may include general feelings of anxiety, the

feeling of being unable to cope, being too upset to talk, and finding it difficult to

concentrate and assimilate information to help make and communicate an informed

decision.

Our research found that at most firms, the branch and telephony teams are trained to

identify vulnerability and to assess the customer’s ability to understand, weigh up and

In general, firms have removed sales targets from remuneration packages and bonus payouts,

focusing instead on quality of service provided, including, where appropriate, identification of

vulnerability and a consideration of outcomes.

Good Practice

All firms have removed the requirement for scripts, adopting a more customer service based,

conversational approach to handling calls. It is felt that scripts prevent sincerity and there is a

requirement for staff to tailor conversations based on the customer’s individual circumstance. This

is supported by the removal of average call monitoring times to encourage fuller discussions.

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retain information. One firm has trained its staff to test a customer’s understanding of a

product by using the Royal College of Psychiatrist questions4 during the sales process,

and asking customers to confirm key product terms and associated risks. Whilst the

questions will be product specific, examples may include:

Can you summarise the key consequences of entering into this credit agreement?

Can you tell me what the consequences will be if you start to miss payments?

Can you tell me what the total amount is that you are borrowing?

What is the total amount you have to repay (including interest)?

How long do you have to pay it back?

How many payments will you have to make?

Firms should have mechanisms in place to support customers identified as vulnerable,

but as most sales are non-advised, there is a challenge in ensuring that the customer is

given sufficient information to help make a balanced and informed decision, and that

staff avoid slipping into the realms of implied advice and providing personal opinions on

product suitability. Vulnerability can take many forms, and the needs of customers may

also vary, which can make it extremely difficult for staff to manage, particularly where

these instances are few and far between and where sales policies and processes do not

account for vulnerability at the point of sale. In these cases, whilst the customer

experience is critical, it can often be too easy to take things a step too far.

We see a need for firms to provide further training and guidance to staff which may

include:

o Educating staff on the types of support the firm can offer in cases where

vulnerability is identified at acquisition; this may include: giving customers the

time to reflect on the information they have received, allowing a family member

to accompany the customer in a face to face meeting or defining referral points

for a specialist team to engage with the customer;

o In the context of vulnerability, what a good non-advised sales process might look

like, with practical examples of support the staff members can provide, whilst

avoiding straying into implied advice and what the consequences of this might

mean for the customer;

o In cases where the firm has concerns over product suitability, (having supported

the customer in making an informed borrowing decision), but the customer insists

they want that product, having escalation points for those decisions to be

considered in greater detail including, for example, considering further avenues of

support;

o Strengthening quality assurance frameworks to ensure staff are assessed on the

quality of their sales, on a non advised basis, reflecting this requirement in staff

objectives and targets;

o Increasing use of mystery shops and feeding the outputs of this into

strengthening existing process.

4 referred to in the ‘12 steps for treating potentially vulnerable customers fairly guidance

Good Practice

One firm is acutely aware of the difficulties language barriers may present in understanding key

products terms and features and their contractual obligations. This has led to the development of

a database of 2nd language speakers across the branch network to support customers through the

sales process where language is identified as a barrier.

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5. Driving a consistent approach across all channels

Our research found that there are inconsistencies in the identification of vulnerability

across branch, telephony and digital channels. Whilst most firms have projects in place

to drive consistencies across branch and telephony through staff training, for firms

operating a digital platform identifying vulnerability is a clear challenge, particularly

where the vast majority of applications are made online.

We recognise the need for guidance and a longer term solution for digital, although,

depending on the nature of the vulnerability, consideration may be given to the

following:

The use of clear and fair website content and its presentation;

Interactive videos to present information and the use of intelligent questioning to

check the customer’s understanding of a product;

Gaining input from external subject matter experts such as charities via focus

groups on website design and content;

Frequently asked questions (FAQ) and the availability of web chat facilities;

Clear signposting of details for telephony teams for additional help and support

where needed; and

Setting parameters to prompt a manual assessment where there have been a

number of searches registered at a credit reference agency in a short space of

time.

6. Proactively identifying vulnerability - existing account holders

Statistics show that more and more customers are transacting digitally, limiting

opportunities for firms to engage in face to face or telephone contact. We found that this

generally sits at odds with most firms’ strategies for identifying and dealing with

vulnerability which places a reliance on face to face or telephone contact with their front

line teams.

Whilst there are clear challenges to identifying vulnerability digitally, the benefits of

maintaining a digital platform means that in most instances firms have access to a large

array of transactional information on customers, which, with the correct data analytic

tools, can help decipher trends and flag up anomalies. This has been achieved in other

One firm has a dedicated specialist team for staff to refer new applications where the customer is

identified as being vulnerable; this prevent an automated decision and triggers a manual

underwriting process. Another firm applies flags to applications where customers are identified as

vulnerable, which means that the specialist team remains responsible for supporting the customer

in managing the account.

Good Practice

In accordance with the BBA’s Guide to Credit Scoring, a firm’s acquisition strategy prevent an

automated decision where a notice of correction is present at the bureau. This diverts the

application for manual review and further support if required, though such notices are few and

far between.

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areas such as financial crime, where firms have been able to analyse data to identify and

flag suspicious transactions, usually through setting rules and parameters on their

transaction monitoring systems. There may be scope to analyse data to help identify

anomalies in account activity, which may indicate that there has been a change in

circumstance, or where internal and external data sources show potential signs of

financial stress, and the underlying cause may be attributed to customer vulnerability.

Whilst this paper acknowledges the role that individual characteristics or situations can

play in determining whether someone is vulnerable, it is important not to lose sight of

the impact the market can play in creating or exacerbating a vulnerable situation. For

example, an increase in interest rates may impact affordability on existing repayments,

which, coupled with a change in circumstance, may cause anxiety or stress which, in

turn, affects the customer’s ability to manage their finances and deal with the firm.

7. Exploring the Link between Scams and Vulnerability

A customer in a vulnerable circumstance may be more susceptible to a scam, in the

same way the victim of a scam may also be rendered more vulnerable. This may stem

from a lack of trust, causing a customer to retreat from the mainstream banks, or

because of the impact this has on a customer’s financial situation. Whilst we recognise

that most scams tend to be linked to investment products, and therefore sit outside the

current product scope of the Code, the consequences of falling victim to a scam can

often be far-reaching. This is especially the case where:

the financial impact of falling victim creates a situation where the customer is no

longer able to manage their existing monetary commitments, giving rise to

financial difficulties; or

where credit is used to plug the financial impacts of a scam.

Scams are becoming more prevalent and sophisticated, bringing into question the role

the financial services industry plays in helping customers manage their money. Whilst in

recent years, there has been an onus on banks to establish systems and controls which

help identify scams and protect customers, the responsibilities of a customer remain less

clear cut. The emphasis should be focused on raising awareness to help customers avoid

falling victim. In this regard, firms may wish to consider:

Horizon scanning - being proactive in the identification of scams, which should

drive their strategy on communicating with customers either through branch

literature, website, letter or email notifications and educational material to help

raise awareness and prevent customers being exploited by scams;

Customer Education - covering the types of scenarios the bank has come

across and the types of questions the fraudster might pose to the customer;

Good practice

Consideration should be given to whether firms could do more to proactively monitor accounts

where transactional information or internal and external data show potential signs of financial

stress, and where the underlying cause may be due to customer vulnerability.

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Staff Training - front line staff should keep their knowledge of scams up to date,

including the likely scenarios they might encounter and the strategies that

scammers might use to confuse customers into paying; is there an opportunity to

flag the existence of these scams as something for the staff to bear in mind whilst

taking the call with the customer;

Developing appropriate Contact Strategies – considering the method by

which the bank may decide to contact the customer, once a suspect transaction is

detected. The bank should have regard to the methods deployed by the scammer

in contacting the customer, when considering the most appropriate contact

strategy; for example, could the bank have contacted the customer via telephone

to raise the suspicion rather than email? In some cases, an email alert may not

be the most appropriate medium to communicate with the customer as it does

nothing to allay the customer’s fear that the email may also be a scam.

Being alert to signs of vulnerability – this may include behavioural factors

such as confusion, agitation, or signs that a story does not add up.

Delaying payment – giving the customer sufficient time to reflect on the

transaction particularly where the transaction sits outside the customer’s usual

transaction history and the recipient appears suspect.

One of the key decisions is balancing the inconvenience to the customer in deploying

these methods against the benefit of not being scammed, and so any remedies need to

bear a customer’s risk appetite in mind.

8. Supporting your colleagues

However firms choose to structure their support for customers in vulnerable situations,

there is an acknowledgement that the effects of dealing with certain situations on a daily

basis may be difficult and traumatic for staff. During the course of our discussions, a

member of front line staff explained that the demands of her job, and the types of

situations she deals with, has seen her role evolve from a personal banker to one of

counsellor, accentuating the qualities of empathy, sensitivity and patience, akin to that

of someone working in a caring profession. Whilst possessing these qualities is integral

to firms providing a fair and positive customer experience, there is a parallel need for

firms to build and maintain an appropriate support network to support staff in their roles.

This may include:

The option for counselling;

Building a good rapport within teams, knowing that they can ask questions and

access immediate support via team leaders;

Offering rotations within the teams and across the firm. At one firm, agents are

allocated a number of vulnerability queues, which means that each call requires a

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different skill set depending on the vulnerability they are dealing with5; this

ensures staff members remain interested and engaged and that their knowledge

and experience continue to develop.

9. Developing an Industry-wide approach through external collaboration

Whilst most firms are acutely aware of the benefits of external collaboration with

charities, few have developed the relationship at a business level, to allow for the

sharing of best practice and to support a better understanding of vulnerability. One firm

has facilitated cross site visits with charities, inviting an external view on the adequacy

of their policies, processes and training in supporting customers in vulnerable situations.

In the case of one firm, this has resulted in charities signposting cross-sector

organisations to the firm to allow for the sharing of any learning and encourage

collaboration and alignment in practice across industries. This is based on an

understanding that a customer in a vulnerable circumstance may hold multiple products

across a number of different financial services firms, and therefore a consistent

approach, industry wide, will help minimise customer detriment.

The BBA’s Financial Services Vulnerability Taskforce has facilitated the sharing and

pulling together of best practice across the financial services industry and cross-sector

but the taskforce had a limited time-frame. Positive engagement should continue as

firms develop, improve and embed their vulnerable strategy, policies and processes.

10. Customer Lifecycle - Product Design

Our research found that most firms’ new product approval and annual product review

5 Vulnerability queue are split to include mental health conditions, critical illness, terminal illness, any other life changing event

that would impact the customer’s ability to manage their financial situation.

Good Practice

One firm has contracted their specialist vulnerability team to finish 15 minutes earlier than their

contact centre colleagues, recognising the difficulties and pressures of dealing with difficult calls.

Staff commented that this allows them to relax and take their mind off the calls and cases they

have dealt with before heading home.

The same firm also recognises the benefits in training the mind, via interactive electronic

applications to teach agents how to relax and cope with day to day stresses and build resilience.

This increases productivity within the team and helps ensure low attrition levels.

Good Practice

Having a clear strategy for engaging with charities and local organisations to facilitate more

intelligent signposting. One firm has a dedicated team focused on building relationships with third

sector organisations which involves bringing their expertise to the firm.

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10. Customer Lifecycle – Product Design

Our research found that most firms’ new product approval and annual product review

processes consider vulnerability as part of the questioning around target market. Whilst

these tend to be restricted to considerations around the distribution of a product and the

need to make reasonable adjustments,6 at one firm this involved considering waiving the

application of fees and charges for long term conditions should the customer need to

settle a loan early. All firms acknowledged that the targeting and design of a financial

product is integral to an inclusive service. We found that there is a general drive to

ensure all products are designed to be simple and transparent. Firms should continue to

ensure that vulnerability is at the forefront and conscience of everyone’s mind and can

be evidenced through the product design, development and launch process and is not a

case of ‘ticking the box.’ Most firms shared the view that fair and transparent products

equate to straight forward marketing.

Firms should ensure that product limitations and risks are drawn out clearly to assist a

customer’s understanding of a product. This should be accompanied by adequate staff

training for customer facing channels with thought given to all content distributed via

marketing channels, to assist customers in making a balanced and informed decision on

a product, having regard to their contractual obligations.

There is also a broader need for customer education around banking products and

services. This need is more evident for customers encountering credit or banking

products for the first time; for example, young adults where limited knowledge may

impact product selection.

11. Collections

All firms have established specialist teams within collections to assist customers

identified as vulnerable and in financial difficulties. These teams have existing

relationships with free money advice agencies, such as StepChange and National

Debtline, and many are looking to strengthen their relationship with charities as their

vulnerability strategy develops.

6 Equality Act 2010.

Good practice

Firms should have a clear strategy for engaging with charities as subject matter experts both in

general and during the market research phase of a product. This ensures that the viewpoints of

those experienced in dealing with customers with certain vulnerabilities are represented and

accounted for.

Carrying out testing pre-launch; for example, around accessibility, usability and product

literature. Using the outputs to feed into the design and refinement of a product to ensure that it

meets the customer’s needs and delivers fair outcomes.

One firm has worked with the Plain English Campaign, for its current account brochures, terms

and conditions. The bank is replicating this for credit cards when developing terms and conditions

with a view to gaining accreditation. This is focused on identifying and summarising key terms

and simplifying information to aid a customer’s understanding of product features and key risks.

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In one case, a member of staff from an external charity has been seconded on a

temporary basis to assist the specialist team in the identification and management of

customer vulnerability.

Whilst most collections teams have established processes for dealing with vulnerability,

this does not stop firms from looking for areas to improve. One firm has enhanced its

control framework to include case reviews. This involves reviewing letters and calls to

customers identified as vulnerable, over a period of time, allowing firms to assess the

effectiveness of their collections strategy including contact, their approach to setting up

a solution and evaluating whether the solution is appropriate given the customer’s

circumstance. The outputs are used to feed into broader process, policy and strategy

reviews. Voice analytic systems help identify vulnerable customer accounts and whilst

we found that these systems are not yet mature, this technology may be useful in

reviewing the practical effectiveness of more bespoke solutions. See section on

monitoring.

12. Debt sale

The Code prohibits the sale of debt where there is evidence of an ongoing mental health

problem that affects the customer’s ability to repay their debt. We acknowledge the

impact that any vulnerability can have on a customer’s state of mind and their ability to

engage with the lender and maintain their existing financial commitments, and recognise

the need to broaden this provision to reflect the need to determine state of mind. Where

vulnerability is identified by the creditor, these accounts should be ring-fenced and not

sold.

We also recognise that vulnerability can occur at any time including post sale.

Responsibility for managing such accounts should be agreed between the creditor and

the purchaser up front, though any decision should give due consideration to:

Assessing each case on its merits, which may include having regard to the

nature and longevity of the customer’s situation; and

The customer experience and risk to customer outcomes.

The guiding factor here is to ensure ‘a seamless and uninterrupted customer experience

and a fair outcome.’

The industry has instigated the development of minimum standards across creditors and

their debt collection agencies (DCAs) and purchasers, to minimise any interpretational

issues and agree best practice. The working group has established draft measures to

ensure customers in vulnerable circumstances are treated appropriately and

consistently, and get the support they need.

Good practice

One DCA has reviewed its vulnerable customer process for contingent collections to capture the

customer’s consent to disclose information to the creditor to allow the creditor to make a decision

based on the customer’s circumstance to leave the account where it is or recall. This also ensures

that where an account was recalled, the customer would not need to divulge information to the

creditor again, preventing a ‘cold hand-off’.

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13. Data protection

The Data Protection Act requires firms to seek explicit consent from customers when

recording and processing sensitive personal data; this includes information about a

customer’s vulnerability. Firms have traditionally viewed this requirement as a barrier to

recording information in situations where consent is not forthcoming or the disclosure is

from a third party such as a family member or carer. The Information Commissioner has

clarified that when reviewing the fairness of a decision to record information, it will have

regard to the merits of each individual case and the overall customer outcome.7

Firms have worked with their front line teams to offer guidance on recording explicit

consent and dealing with disclosures from third parties. Guidance includes:

o Acknowledging the courage it takes for a third party to call a firm notifying them

of a vulnerability;

o Adopting a ‘can do’ attitude, recognising that a sensitive approach to handling the

call is key, and that by proceeding with the call you may help alleviate some

stress;

o Preventing disclosure of account information or transactional data, but noting

down any unverified disclosures in a factual manner so that this information is

visible where possible, at a single customer level; if systems do not allow for a

single customer view, ensuring there is a manual work-around to allow staff to

identify each account the customer holds, to coordinate account activity and

correspondence, and prevent conversations from having to be repeated;

o Giving full consideration to any action that needs to be taken by the firm to

prevent the account from deteriorating. This should be supported by an

explanation of any appropriate action taken. This may include an explanation on

how the account will operate; for example, ‘the account will be placed on hold;

this will mean that during this time no interest and fees will apply.’

o Recognising that evidence is not a pre-requisite, and is only requested where it is

felt that this information will assist the firm in understanding the customer’s

situation better and to help the customer. Where evidence is requested, firms

ensure they do not follow a rigid process, giving consideration to alternative

forms of evidence.

7 Financial Conduct Authority Occasional Paper No 8; http://www.fca.org.uk/static/documents/occasional-papers/occasional-

paper-8.pdf, pg 67

Due diligence frameworks and audits ensure outsourced collections agencies and debt purchase

firms have processes in place to deal fairly with customers identified as being vulnerable.

For longer term situations, considering the financial impacts of events, including cost of travel to

hospital, medication, and reduced income as part of the income and expenditure to ensure plans

set are reflective of the customer’s current situation and are affordable and sustainable.

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14. Raising flags and Single Customer View

With the exception of one firm, the majority did not have a code or flag which allowed

them to easily identify customers who required additional support, or to exercise caution

when pro-actively extending credit to those identified as vulnerable.8 This is hampered

by legacy systems, and the inability for most to generate a single customer view for

customers with multiple product holdings, although it is acknowledged that this is a gap

which needs to be plugged.

Whilst most recognise the benefits of developing flags as markers to identify customers

who require support, there is a concern amongst some that this may breach the Data

Protection Act, particularly where a flag is raised but the information is no longer

considered accurate or up to date. Given that vulnerability can vary in degrees of

permanence, the length of time this data is held is of prime importance. A flag should

not be maintained unless it is necessary to ensure the individual can be treated properly

and that the information remains current. Whilst the responsibility for keeping

information up to date resides with the firm, there is an onus on customers to keep the

firm informed of any changes to circumstance, to ensure that any adjustments offered

remain appropriate and relevant to their support needs.

One firm has developed a flag to identify cases where customers required additional

support. They have developed these flags to prohibit a pro-active extension of credit and

up-ward re-price on credit card accounts where a customer has been identified as

vulnerable. Where a flag is raised, this should be accompanied with a comprehensive set

of notes on the customer’s account to reflect their current circumstance based on a

complete and thorough fact find.

Firms may also wish to consider the Money Advice Liaison Group’s best practice guidance

on the use of flags which is due to be published shortly.

15. Accessibility and Financial inclusion

We recognise the link between accessibility, financial inclusion and vulnerability. We also

appreciate that inclusive services are in general good for everyone and that the impact

of financial exclusion in relation to vulnerability needs to be explored further, particularly

in relation to lending. This is an area that the FCA is currently exploring more broadly,

and where the LSB will look to engage further.

8 Other than flags for audio and Braille.

Good practice

Firms should consider building in regular review periods and check points for customers and staff

to get in touch. The frequency of review should be bespoke to the customer’s circumstance. This

can only be determined by a complete and full understanding of the customer’s situation, through

a thorough fact find.

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16. Monitoring

As firms document and develop their vulnerability strategies, consideration should also

be given to their ongoing evaluation, to ensure that they continue to operate in a

manner that is conducive to the delivery of fair customer outcomes. This may be

achieved through the:

o Ongoing review and assessment of the design and operational effectiveness of

policies, processes and training, along with an assessment of the internal control

framework;

o Testing the full customer journey through using case reviews to form a view on

the overall effectiveness of the firm’s strategy, response to a situation and

appropriateness of the solution offered;

o The development of customer feedback mechanisms to explore the practical

impact of the current structures in place. Consideration may be given to

establishing formal and informal focus groups to gain insight, and the use of short

customer experience questionnaires, having regard to the need to maximise the

number of customer responses;

o Positive engagement with local, regional and national charities that may be able

to provide a detailed insight into dealing with customers with specific conditions,

or going through a specific circumstance, e.g. MIND for mental health conditions,

and UNLOCK for prisoners. These charities will often have in-depth knowledge of

the challenges faced by these customers, which may be used to develop existing

banking policies and procedures.

17. Management Information

In the majority of instances, there is limited management information (MI) available on

customers in vulnerable circumstances. Where MI is collated, this tend to focus on

identification and referrals to specialist teams and the nature of the vulnerability with no

assessment of whether the solution offered is appropriate. This data is reported in a

monthly dash-board and discussed at committee level with senior visibility.

Good practice

One firm has enhanced its control framework to include case reviews. This involves reviewing

letters and calls to customers identified as vulnerable, over a period of time, allowing firms to

assess the effectiveness of its collections strategy including contact, the approach to setting up a

solution and evaluating whether the solution is appropriate given the customer’s circumstance.

The outputs are used to feed into broader process, policy and strategy reviews.

Firms may want to consider the merits in completing case reviews for customers identified as

vulnerable earlier on in the ‘customer journey,’ as the outputs of these assessments may help

firms identify whether the treatments offered at an earlier stage are helpful in preventing the

customer from getting into difficulty.

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There is a need to develop strong MI which is outcomes focused, and forward looking

and which helps detail:

o the number of vulnerable customers;

o types of vulnerability- if there is a peak in certain vulnerabilities there may be a

need to engage with specialist charities to encourage a better understanding and

provide support;

o solutions and interventions offered; and

o an indication of outcomes, which would allow firms to assess the effectiveness of

their interventions and form a view as to whether these need to be enhanced,

removed or re-worked.

Next steps

Our high level findings were shared with the BBA’s Financial Services Vulnerability

Taskforce, and there is an alignment with the themes contained in the BBA report. We

have developed a number of desired customer outcomes in the area of consumer

vulnerability, which will form the basis of the vulnerability section in the Standards that

are currently being developed. These high level outcomes will be underpinned by

detailed practical guidance and examples of best practice to demonstrate how firms may

be able to achieve the outcome in practice.