What is Vulnerable Customer?

Full Definition

The Financial Conduct Authority (FCA) defines a vulnerable customer as someone who, because of their personal circumstances, is especially susceptible to harm, particularly where a firm is not acting with appropriate levels of care. The FCA groups the drivers of vulnerability into four broad categories, any of which can apply temporarily, sporadically or permanently, and often in combination: health (a physical or mental health condition or disability affecting the ability to engage with financial services); life events (such as bereavement, job loss, relationship breakdown or being a victim of domestic or economic abuse); resilience (low ability to withstand financial or emotional shocks, for example low or erratic income, or over-indebtedness); and capability (low knowledge or confidence in managing financial matters, low literacy or numeracy, or limited digital skills). Under the Consumer Duty, firms are required to take particular care to understand the needs of vulnerable customers, adapt their communications, products and customer service accordingly (for example offering extra time, alternative communication channels, or flexible repayment arrangements), and monitor whether vulnerable customers are receiving outcomes as good as those received by other customers, rather than treating vulnerability as a one-off flag applied and then ignored. In practice this can mean a bank pausing debt recovery action for a customer who has just been bereaved, a lender accepting a third party's authority to act on a customer's behalf where the customer lacks mental capacity, or an insurer providing information in an accessible format for a customer with a visual impairment; firms that fail to identify and respond appropriately to vulnerability risk both poor customer outcomes and regulatory action.

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