Consumer Duty and Vulnerable Customers - ZISHI

Consumer Duty and Vulnerable Customers

Article published in Advice Matters Magazine – Edition 01/2023

The fair treatment of vulnerable customers is not a new topic for the regulator – the first paper specifically on this topic came out in 2015.  It has however been of increasing focus since then and this has been amplified by the impact of the pandemic and the cost-of-living crisis.

While the Consumer Duty is in many ways a reset of how firms should focus on providing products and services that consumers want and need, it is perhaps also the biggest single piece of stand-alone regulation that impacts our approach to supporting clients in vulnerable circumstances.

Of course, the Consumer Duty applies to all consumers, and we must recognise that within this broad audience, or indeed any target market that out products and services are designed for, there will be a subset who are vulnerable. We are expected to have a clear position on who our target market is – and both regulators and lawyers wouldn’t countenance any firm defining that target market as “consumers who aren’t vulnerable”. As we look through the requirements of the Consumer Duty in this article, we will call out the additional considerations we should have to ensure we are fulfilling our duty to vulnerable consumers and treating them fairly.

The Consumer Principle

The Consumer Principle, Principle 12, requires firms to ‘act to deliver good outcomes for retail customers. It sets a higher standard than both:

    • Principle 6 – A firm must pay due regard to the interests of its customers and treat them fairly.
    • Principle 7 – A firm must pay due regard to the information needs of its clients and communicate information to them in a way which is clear, fair, and not misleading.

The vast majority of consumers who could be deemed vulnerable sit in the ‘Retail’ classification. If we are to deliver good outcomes for retail customers, we cannot afford to ignore the additional steps we must take to avoid poor outcomes for customers who find themselves in vulnerable circumstances.

We are required to focus on the outcomes vulnerable customers actually get, and act in a way that reflects how they actually behave and transact in the real world. We will be required to evidence that we have a sufficient understanding of consumer (and vulnerable consumer) behaviour. We need to demonstrate that outcomes which would reasonably be expected are in fact being achieved (and where they are not, address this by tackling the factors that are leading to poor outcomes).

Three Cross Cutting Rules

The FCA has given us three over-arching rules that cut across all their existing expectations of us. For retail clients we must ensure that we:

    • act in good faith towards retail customers
    • avoid foreseeable harm, and
    • enable and support retail customers to pursue their financial objectives

These rules amplify the Consumer Principle and will be challenging to achieve generally but when it comes to vulnerability things can become more complex.

Let’s look at some examples of bad faith remembering that vulnerable customers need additional support.

Sign up for free to continue reading this Article published in the Advice Matters Magazine – 2023 | Edition 01

Interested in this topic?

Download our free Consumer Duty Guide – Key Steps for 2023. The guide includes:

    • Timeline of Implementation
    • Consideration for Next Steps
    • Project scope

Watch on-demand webinar “Are You Ready for the New Consumer Duty?” recorded on 03 November 2022 where we have one of the most informative panels of regulatory experts discussing the proposed changes and sharing their perspectives on what can be done by firms today to ensure they are delivering the ‘right outcomes for consumers’ and whilst living up to the regulators hope that business will innovate to meet the interests of consumers.

How we can help

Below are just a few of the things we can help and support you with on your Consumer Duty implementation journey:

  • Implementation plan check
  • Tailor made Consumer Duty in-house training for the board and others
  • Consumer Duty customer Journey evidence framework
  • Project management
  • Regular Assurance checks

If what you need isn’t in the list above talk to us – we ‘re sure we will be able to help. Contact us at:

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