The FCA’s recent multi-firm review on firms’ treatment of vulnerable customers reveals important insights for financial services firms as they continue to ensure they meet the expectations of the original rules as set out in “FG21/1 Guidance for firms on the fair treatment of vulnerable customers” and  to meet the new Consumer Duty expectations. While there are encouraging examples of firms offering flexible, tailored support in the eyes of the FCA, challenges remain in fully integrating the guidelines into operations, particularly when dealing with customers experiencing multiple characteristics of vulnerability.

“…we know from the Financial Lives survey and new consumer research which we specially commissioned that consumers in vulnerable circumstances continue to report poor outcomes when compared with other consumers.” (FCA Press release, March 2025)

The findings emphasise the need for financial firms to adopt a more holistic approach, ensuring all staff are well-trained and capable of identifying and addressing different forms of vulnerability. Under the Consumer Duty, firms are now required to ensure they deliver good outcomes for all consumers, especially the most vulnerable. Irrespective of which set of rules you use to assess compliance, the key message is that firms must be vigilant and proactive in identifying, tracking and improving their performance in this area, as poor customer outcomes are still common for those in vulnerable circumstances. Conversely, but with no great surprise, it is reported that those customers experiencing vulnerabilities that receive tailored support once that is identified report feeling better informed about their options and a sense of achieving better outcomes for themselves.

One aspect of the findings that will have been of great comfort to the FCA is around the impact of the Consumer Duty on this aspect of its role protecting consumers from harm:

“We also saw a renewed focus among firms on delivering good outcomes for consumers in vulnerable circumstances because of the Consumer Duty.”

In setting out the areas of good practice and where improvement is required, the FCA has done so against the Consumer Duty expectations and requirements:

• governance and outcomes monitoring
• consumer support
• consumer understanding
• products and services

At this stage, there is no suggestion the rules on Vulnerable Customers will be replaced fully by Consumer Duty expectations, but this may be an indication that could happen in the future.

Key Findings from the FCA Review

The review revealed that many firms have made significant progress in their treatment of vulnerable customers, with examples of positive practice including enhanced accessibility for those with physical disabilities, dedicated teams for dealing with specific vulnerability issues, and proactive identification of potential vulnerabilities through customer data. The FCA has also specifically recognised the positive impact of senior leadership engagement at some firms, something that it has identified as having a positive impact across the whole response at those firms.

“We saw that genuine engagement by senior leaders – rather than only in principle – improved the quality and cohesion of a firm’s approach to vulnerability, and the prominence of vulnerability in firm culture.”

Three key areas have been identified though, where the FCA feels more work is required. These are:

1. Working to remove what are perceived as barriers to disclose of vulnerability characteristics;
2. Improving the way firms identify and deal with customers who are experiencing the effects of multiple characteristics of vulnerability; and
3. Ensuring the responses provided by firms when vulnerabilities are identified are tailored and personal, which inevitably leads to better outcomes.

Identification remains a key challenge, with many characteristics less easy to identify and customers often reluctant to proactively disclose what can feel like an embarrassing situation to find themselves in.

A particular issue – and often the root-cause of less positive outcomes – is the way firms approach the identification of those customers experiencing multiple or less visible characteristics of vulnerability and the way they then adapt their services. Firms are urged to go beyond mere compliance and embed the treatment of vulnerable customers into their everyday operations, with improvements to their monitoring processes to ensure these customers consistently receive better outcomes.

Areas of good practice:

• ‘A small number of firms’ were identified as using data affectively to identify customers in vulnerable circumstances and the outcomes they experienced;
• There were ‘examples’ of firms delivering flexible tailored support, strengthened by staff training on how to support customers with characteristics of vulnerability;
• The FCA ‘saw firms’ reviewing and improving their communications were cited, particularly around product information;
• ‘Some firms’ incorporated feedback into their product governance and development processes.

Areas for improvement:

• ‘Most firms’ were unable to show how they effectively monitored and acted upon the outcomes achieved for vulnerable customers. This included some key concerns around failure to define what good outcomes look like and a failure to escalate identified issues and make changes where needed;
• ‘Some firms’ failed to provide adequate staff training on identification, failed to effectively encourage customer disclosure and failed to provide prompt and appropriate support;
• There were ‘examples of firms’ not providing appropriate channels for communication and not undertaking any testing of consumer understanding.
• ‘Most firms’ could not evidence how they had embedded the needs of vulnerable customers into their product and service design processes.

The terms used to describe the frequency with which the FCA saw those positive and negative issues suggests the majority of firms sit on the wrong side of the fence when it comes to meeting FCA expectations fully.

The full report contains a detailed set of examples for firms to consider.

FCA Webinar: Enhancing Vulnerability Practices

The treatment of vulnerable customers clearly remains a key priority area for the FCA, with a 90 minute webinar hosted a few days after publication of the report further evidence of the work it is doing to try and help firms make the right decisions on their own approach to compliance. Hosted by two senior FCA leaders, the session notably included contributions from two external presenters, representing those with vulnerabilities (from learning disability charity MENCAP) and market practitioners (the Chief Compliance and Corporate Affairs Officer for Allianz.).

The webinar focused on practical solutions to improve vulnerable customer care, with the FCA urging firms to prioritise staff training, enhance accountability, and refine monitoring practices to ensure a uniform standard of care. Additionally, firms were encouraged to incorporate vulnerability considerations into product design, communication strategies, and service delivery. This is a commitment that requires the support of a wide range of individuals within your firm to get right.

Firms should now be shifting from reactive measures to proactive strategies, embedding the Consumer Duty requirements into their cultures and operations. These steps will not only ensure compliance but will also help firms build stronger, more trusting relationships with their vulnerable customers.

What should firms be doing now?

There are a number of actions you can take and questions firms should consider now. These include:

• Watch the FCA webinar. It is available on-demand, with a simple registration getting access. It may be 90 minutes, but there are some great examples to help firms understand what is expected. (FCA webinar on-demand.)
• Fully review the examples of good and bad practice against your own approach to help identify any areas of weakness that the regulator would expect you to improve upon.
• How do you identify customers with one or more characteristics of vulnerability? Could you get better at identifying customers who may be affected by one or more characteristics of vulnerability and make it easier for them to disclose those where the circumstances do not allow you to identify it. The evidence suggests that firms which are aware of vulnerability characteristics are generally good at responding positively to those, particularly where they are singular characteristics.
• Are you familiar with the full definition of vulnerability used by the FCA? Consider how you might identify customers experiencing one or more of these. The definition covers:
  • Health conditions – one or more conditions lasting or expected to last 12 months or more that impact a lot on day-to-day activities such as addiction, vision, hearing, mental health or dexterity.
  • Negative life events – customers who have experienced one or more event in the last 12 months such as the death of a close family member, becoming a carer, losing a job or domestic abuse.
  • Low financial resilience – customers who have fallen behind with bills in the last 6 months, are struggling with debt generally or have a very short period of bills covered by savings.
  • Low capability – these are people who have limited confidence managing money matters or perhaps struggle with using technology to access services.

The full definition of vulnerabilities can be found on page 10 of the original guidance.

• Consider how you respond before, during and after you identify characteristics of vulnerability. It should hardly be a surprise, but customers who receive tailored support report feeling more positive about the financial services provider – it builds relationship of trust.
• Review your data and MI on vulnerable customers. What do you measure and how do you use that data. Who has sight of that data?
• Review the training provided to staff. Do your staff know how to sympathetically encourage the disclosure of vulnerabilities and what to do when those are disclosed?
• Review your product governance frameworks. Are these aligned to the expectations on the treatment of customers with vulnerabilities? Can you evidence the way you have built relevant data and feedback into those processes?
• Be especially aware of customers who may be experiencing multiple characteristics of vulnerability as these have been identified as more likely to report poor outcomes.
• Be prepared for the publication of the next Financial Lives survey results – the FCA has already awarded the tenders for this work and the next wave of data is likely to be published in 2026. In the interim, the 2024 results provide some valuable insight into the issues and have formed part of the FCA review. (See https://www.fca.org.uk/financial-lives)

Conclusion

As the financial sector continues to adapt to evolving regulatory expectations, it is clear that the treatment of vulnerable customers remains a critical focus for the FCA. It has already awarded the contracts for the next phase of its Financial Lives Survey and we can expect to see the next set of data in 2026. With the current analysis significantly influenced by the comparison of data from the 2020 and 2022 survey with the 2024 findings, it is a certainty that we will be hearing more about the way firms have progressed with their treatment of vulnerable customers when the next report is published. That is not a pass to ‘kick the can’ on vulnerable customers down the road into 2026 though. There are key questions for firms raised in this report and the FCA will be expecting to see progress against the issues raised in the next data set.

By acting on the FCA’s findings in this report, firms can move towards a more comprehensive, empathetic approach to vulnerability. The challenge now lies in how firms embed these practices into their day-to-day operations, ultimately ensuring that all customers receive fair, equitable treatment under the Consumer Duty. The good news for firms is that the FCA has identified no need to change or update its rules on vulnerable customers. But the message for firms is clear – there remains work to do for many firms to fully meet those rules. As we highlighted earlier, it seems to us that the FCA feel that there are more firms with work still to do than firms who can treat their approach to vulnerable customers as ‘BAU’ activity.

If you have any questions about the rules on vulnerable customers, the way the Consumer Duty complements those rules, or the approach being taken by your firm, please do speak with the author or your usual ICSR contact.