FCA’s new consumer duty is everyone’s duty

Inclusive design is no longer the job of an accessibility team. It’s for everyone.

We welcomed the recent release of FCA’s policy statement and guidance last week.

And as an inclusive design practice working in financial services, reading the policy guidance excites us.

Yes. I say. But stay with me.

The FCA has just linked its guidelines on the fair treatment of vulnerable customers to its new consumer duty legislation. This effectively enforces the use of inclusive design at every customer touchpoint with a financial services provider.

This is an exceptional result for customers. But make no mistake, this will also be a seismic shift for many financial services firms, and one that will be difficult for many to deliver over the next 12 months.

Guidelines become a duty

In early 2021, the Financial Conduct Authority (FCA) introduced guidelines regarding the fair treatment of vulnerable customers.

They define a vulnerable client as “someone who, because of their personal circumstances, is particularly susceptible to harm, particularly when a company fails to act with appropriate levels of care.” This is broken down further into their four vulnerability factors which are well worth a read.

But that was just an orientation. It was a set of very good suggestions, but they lacked teeth. No one would go to court if they didn’t follow him.

Now that changes. And the clock is ticking.

The FCA’s new duty (released Wednesday, effective July 2023) effectively incorporates many of the previous guidelines into regulatory enforcement. It is explicitly stated in the introduction:

“We expect consumers with vulnerable characteristics to benefit from the overall improvements in outcomes achieved through the new requirement…

Section 1.27 FG22/5 Final Non-Handbook Guidance for companies on the Consumer Duty

Who are the vulnerable customers?

FCA’s four vulnerability factors make it easy to recognize the range of possible vulnerabilities, many of which could be recognized as having been experienced ourselves. The vulnerability is broad, transitory and situational. When it comes to this, anyone can be vulnerable at any time.

And this is the crucial point that inclusive design tries to solve. It’s about designing for everyone. Being fully human-centered and learning to leave our subconscious biases and stereotypes at the door.

This will challenge FS companies

So if you’re in financial services, you might have thought, great. Good news, right? We’ll email it to our accessibility teams and follow up.

No.

It’s bigger than that. Better than that. The FCA did two pretty smart things.

First, Duty expects companies to minimize foreseeable damage any customers in their target market – not an “average” customer.

In response to sensitive pressure, the FCA removed reference to serving a hypothetical “average customer” in the final duty rules, acknowledging that this could lead to vulnerability whitewashing.

Instead, businesses are required to effectively serve “customers in their target market”:

“we want companies to focus on the customers they actually serve, not on a hypothetical average”

(PS22/9 Section 10, FCA response to Q13)

Second, the tips clearly indicates that any client may be a vulnerable client.

Given the (appropriate) broad understanding of vulnerability in the guidelines, any or all of these customers in this target market could be a vulnerable customer (and cannot be expected to disclose this to the service provider ).

Chris Fitch of the Money Advice Trust has clearly pointed this out in his excellent article on the subject.

… the FCA has confirmed something most companies have known for a long time: that they are now expected to meet many of the standards of conduct for all customers that were tested in previous FCA vulnerability guidelines… the FCA has given financial services companies a framework of expectations that will challenge them significantly.

Nile helps teams find the path to progress

Some of our more forward-thinking FS customers anticipated this change last year.

Our teams have worked in partnership with them to explore what it really means to effectively serve vulnerable customers.

And the changes required are seismic. The shift to a culture of inclusive design and protection of vulnerable customers does not reside in the accessibility team or the call center. It’s everywhere, all at once.

But the benefits are enormous.

Over the past year, we’ve helped SF companies create design and research toolkits, launch new customer engagement techniques, release new archetypes for inclusive design, launch local campaigns and cultural change initiatives, and create new guidelines and steering committees for their organization.

From the legal team drafting terms and conditions for a new product to the QA team performing testing on a new application implementation, we find that almost everyone benefits from an up-to-date understanding of client vulnerability and implementing inclusive design.

And if you were in any doubt, the FCA recently agreed with us:

“Companies can consider taking an inclusive design approach to meet the needs of customers in their target market, including those with characteristics of vulnerability.”

Section 6.31 – FG22/5 Final Non-Handbook Guidance for companies on the Consumer Duty

About Eleanor Blackburn

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