.svg)
The UK’s Financial Conduct Authority (FCA) has told payments firms they must improve their treatment of vulnerable customers following a review last year.
The March 2025 review considered whether the regulator’s guidance remained appropriate in light of the Consumer Duty. It found that although there are examples of good practice, vulnerable consumers continued to report poor outcomes compared with other consumers, particularly if they have multiple characteristics of vulnerability.
The FCA defines a vulnerable consumer as someone who, due to their personal circumstances, is especially susceptible to harm, particularly when a firm is not acting with appropriate levels of care.
The regulator divides vulnerability into four types: health conditions; negative life events; low financial resilience; and low capability, all of which may increase the risk of a consumer being vulnerable to harm.
It determined that the greatest potential for harm occurs when characteristics overlap, and noted that a much greater proportion of those with multiple characteristics of vulnerability said they had had “no positive experiences”. They also reported a much lower incidence of positive communication experiences.
Consumers with multiple characteristics of vulnerability are likely to have differing needs and, as a result, may not always be able to interact with financial services firms in a way they find easy. This may lead to problems accessing suitable products and services.
The interaction between each driver of vulnerability may differ, and research shows that those with low financial capability or poor health were less likely to have felt supported by financial services firms while handling a negative life event. In comparison, those with health conditions are more likely to feel that firms did not provide adequate time to consider the impact of a negative life event, potentially impeding suitable financial decisions.
The FCA also found that vulnerable customers were more likely to report slow responses to enquiries, and as perceptions of timeliness can vary, especially when urgent needs such as bill payments are involved, firms should factor this into their communications strategy.
The consumer research found a number of negative outcomes were caused by firms not communicating in a timely way. These included consumers not being able to plan ahead and feelings of low self-worth.
The bigger picture
According to the FCA’s 2022 Financial Lives Survey, consumers are moving away from traditional means of paying for goods and services towards digital payments.
However, individuals in vulnerable circumstances have poorer outcomes, are more likely to experience harm and be digitally excluded.
Vulnerable consumers are less likely to have some private pension provision, more likely to have high-cost credit and loans, and less likely to use digital banking services.
They are also less likely to take precautions against fraud than other consumers, such as by checking that websites are secure before giving their bank or credit card details.
The FCA’s overarching aim is for vulnerable consumers to have outcomes that are as good as those who are not in vulnerable circumstances.
The regulator has a duty of care to such consumers, and its review is intended to ensure that firms are taking appropriate steps to identify vulnerabilities and implement processes to provide the right level of protection.
Its flagship Consumer Duty aims to put the protection of consumers at the forefront of financial organisations’ practices, and the treatment of the vulnerable may be the most obvious way that firms can comply with the spirit of the regulation.
The UK is not the only jurisdiction where regulators are acting to protect vulnerable consumers.
In January 2025, for example, Dutch government ministers asked buy now, pay later (BNPL) providers to refrain from offering their services in physical stores, due to concerns of over-indebtedness among the young and vulnerable.
And in 2024, the Central Bank of Ireland (CBI) significantly revised the country’s Consumer Protection Code (CPC), aiming to protect citizens from growing digitalisation risks and scams, and support vulnerable consumers.
Why should you care?
The FCA’s review found that firms have yet to make significant progress in product and services design. Firms should consider this as a focus area as they continue to embed the Consumer Duty.
The regulator said firms must:
- Clearly define good outcomes, use good quality data and escalate poor performance where necessary.
- Tailor communications to the target market and ensure their timely delivery.
- Improve training on vulnerability for product and design staff.
- Test consumers’ understanding and make changes where needed.
- Test and review communications with consumers via feedback or insight-gathering.
Under the Consumer Duty, firms must make sure the design of products meets the needs, characteristics and objectives of the target market. They must ensure they do not adversely affect groups of customers with characteristics of vulnerability and avoid causing foreseeable harm in their target market.
Indeed, firms should take vulnerable consumers into account at all stages of the product and service design process.
This includes considering the potential positive and negative impacts of a product or service on customers in vulnerable circumstances, and ensuring all relevant staff have the appropriate skills and capability to understand the needs of customers in vulnerable circumstances in their work.
Firms should:
- Implement appropriate processes to evaluate where they have not met the needs of customers in vulnerable circumstances, so that they can make improvements.
- Produce and regularly review relevant management information on the outcomes they are delivering for customers in vulnerable circumstances.
- Ensure that any third-party providers and outsourcers treat vulnerable customers fairly through ongoing due diligence.
The FCA has a binding duty of care to all consumers, and it expects firms to identify and respond to vulnerability in a fair and supportive way.
And the regulator has teeth — it has a wide range of enforcement powers at its disposal that it can deploy against firms and individuals that breach its rules and regulations.
As of May 2025, the FCA has an ongoing investigation into alleged breaches of the Consumer Duty.
It has achieved several enforcement outcomes in relation to the unfair treatment of customers over the past 12 months, including imposing “substantial penalties” on HSBC, TSB and Volkswagen Finance, although the misconduct in those cases preceded the introduction of the Consumer Duty.
Sanctions can be civil, criminal or regulatory, and can include: significant fines; naming and shaming non-compliant firms; and withdrawing or suspending firms’ authorisation to carry out regulated activities.
In addition, firms should understand that their own best interests are aligned with those of their vulnerable customers: the reputational effect of being seen to neglect or give vulnerable consumers poorer services is not insignificant.
