The Treasury Committee has today announced a probe into vulnerable customers and how they are served by the financial services industry. The terms of reference are set out below.
Tom Selby, senior analyst at AJ Bell, comments:
“Ensuring vulnerable and potentially vulnerable customers are identified and protected is one of the most important challenges facing the financial services industry today.
“While the Treasury Committee’s terms of reference mostly focus on banking and the disappearance of high-street branches, the wider sector – including advisers and pension providers – also have a huge role to play.
“This is not an issue with a catch-all solution, however. Although there are some customers who may more obviously be vulnerable – such as those diagnosed with Alzheimer’s – anyone can potentially become vulnerable at any time.
“Furthermore, it is not always obvious when someone is vulnerable. Many people suffer for long periods with debilitating depression, for example, without even their closest family knowing.
“Tackling vulnerability therefore cannot be dealt with by any one company or industry in isolation. It requires broad collaboration between firms, regulators, politicians, charities and customers themselves.
“Companies across financial services need to build understanding of vulnerability into their respective cultures, sharing best practice and continually reviewing and improving the processes put in place to protect customers.”
Terms of Reference
1. How should financial service providers define ‘vulnerability’?
a. Examine how financial services firms define ‘vulnerability’ and assess how practical the Financial Conduct Authority’s definition of vulnerability is.
b. Evaluate the training and practices in place at financial services firms in relation to vulnerable consumers.
c. Consider the merits of having a ‘duty of care’ for financial services providers and examine whether this would increase protection for vulnerable customers.
2. Are certain groups of consumers excluded from obtaining a basic level of service from financial services providers?
a. Examine which customers can be most disadvantaged when bank branches close and consider whether there is evidence to suggest that bank branch closure leads to increased financial exclusion.
b. Consider how financial services providers plan to cater for customers who will no longer have easy access to a bank branch.
c. Examine how providers ensure that their marketing, communications and support services are accessible to vulnerable consumers, including consumers who have low literacy levels.
d. Consider the trends on the use of the Post Office services in areas where bank branches have closed and examine what role the government could play in maintaining the Post Office network to provide shared services.
e. Consider whether there are barriers to participation which lead to consumers not having a bank account.
f. Evaluate the systems and controls in place for Power of Attorney at financial services providers.
g. Examine how financial services providers comply with equality legislation and the mechanisms for enforcement.
h. Evaluate how regulators hold financial services providers to account for how they treat vulnerable customers, and how regulators instruct financial services companies to comply with equalities legislation.
i. Evaluate how fintech and technological innovation could help those who cannot easily access physical financial services branches.
3. Do vulnerable consumers pay more for financial services products?
a. Examine the effectiveness of procedures deployed by financial services providers to ensure that customers properly understand the products that they are purchasing, including those who have low literacy levels.
b. Examine whether vulnerable consumers pay prohibitively more for certain financial services products, including travel and home insurance.
c. Consider whether vulnerable consumers have access to appropriate and affordable credit.
d. Evaluate the impact of reducing the number of free-to-use ATMs on vulnerable consumers.
e. Evaluate how regulators assess whether financial services providers are providing products to consumers at a fair price.
