by Ollie Wright, Head of Financial Institutions Relationship Team, Estatesearch
The FCA’s recent multi-firm review is the first published report that directly correlates Consumer Duty with the experiences of customers dealing with bereavement, including those acting under a power of attorney. (Retail banks’ treatment of customers in vulnerable circumstances Multi-Firm Review: good practice and areas for improvement | FCA)
The review highlights substantial progress made by retail banks and building societies in improving the way they approach the treatment of customers in vulnerable circumstances, placing greater emphasis on empathy, communication, and accessibility. It represents a paradigm shift in attitudes and highlights the improvements being made to outcomes for families and legal representatives when someone has passed away.
Embedding Consumer Duty in Bereavement Journeys
As a team who work with legal representatives of the bereaved on a daily basis, we have seen first-hand the impact of Consumer Duty and the Vulnerability Guidance to help those in vulnerable circumstances. Up until very recently, customer journeys have been inconsistent across the industry, but this is changing, and the FCA’s report illustrates much of the positive work that has been undertaken to address the issues.
FCA Guidance: Consumer Duty and Vulnerability
The FCA’s report starts by referencing the section of the FCA Handbook on the Consumer Duty (Principle 12 and PRIN 2A, ‘the Duty’), the non-Handbook Guidance for firms on the Consumer Duty (FG22/5, the ‘Duty Guidance’), and the Guidance for firms on the fair treatment of vulnerable customers (FG21/1, the ‘Vulnerability Guidance’). The report states: “The Duty builds on the Vulnerability Guidance, requiring firms to consider their customers’ needs at every stage of the customer journey and act to deliver good outcomes for all customers, including those in vulnerable circumstances.
“The Vulnerability Guidance remains relevant for firms, however, and firms should continue to refer to it for further information on our expectations for how firms should ensure that customers in vulnerable circumstances experience outcomes as good as those for other consumers.”
Deceased subjects are not subject to GDPR, which has historically led to families and legal representatives being treated with less sensitivity and efficiency than living customers. However, bereaved families are themselves in a vulnerable position, and it can be argued that no individual is more vulnerable than when they have passed away and no longer have any legal rights or protection. Therefore, the introduction of Consumer Duty, with its focus on delivering good outcomes for all customers, has been a vital step forward in ensuring a best practice approach across the board. The FCA’s multi-firm review report states: “Overall, the firms we reviewed had taken steps to refine their approach to the treatment of customers in vulnerable circumstances since the introduction of the Duty.”
Encouraging Progress and the Role of Innovation
The report reminds firms that: “Paragraph 1.7 of the Vulnerability Guidance sets out that fair treatment of customers in vulnerable circumstances should be embedded in policies and processes throughout the whole customer journey.” It goes on to say: “Paragraph 9.14 of the Duty Guidance sets out our expectation that firms respond flexibly to the needs of customers with characteristics of vulnerability. Firms will usually need to be able to provide support to their customers through different channels or by adapting their usual approach.” Further confirming: “where a person is authorised by a retail customer or by law to help in conducting the retail customer’s affairs (such as a power of attorney (PoA)), the firm must provide the same level of support to that person that they would have provided to the retail customer.”
We welcome the findings of the report that confirm that organisations have put clear policies, procedures and timeframes in place for staff to register bereavement and PoA cases. Refreshingly, innovation has also been instrumental in improving outcomes. For example, some firms are proactively using data and transaction patterns to identify those potentially at risk of being in vulnerable circumstances, so that they can respond to their needs better. In some firms, centralised systems and AI are also being used to help identify potential characteristics of vulnerability.
In relation to customer journeys, firms had “generally considered how they might adapt their bereavement/PoA customer journeys to help ensure they are as straightforward and flexible as possible.” Most firms had dedicated bereavement teams.
Of course, there are always areas for improvement. The report mentions situations where customers’ capacity suddenly changed or when funds were urgently needed, and the increased support and resources needed for staff to recognise customers’ needs and escalate matters appropriately.
While the FCA recognises and supports firms’ efforts to safeguard customers from fraud or financial abuse, it was stated that there was a need for balance against the need for customers to continue with their basic banking requirements. “In some cases, we observed customers and their representatives experiencing extended periods where they were unable to access funds to pay essential bills.”
Other common issues reported were where “customers (particularly in bereavement and PoA processes) had to repeat information when speaking to different staff members, or having their cases delayed or dropped altogether because they had been ‘lost’ in the firm’s systems, risking further distress and upset.” Further issues included fragmented customer relationship management (CRM) systems across business lines making it more challenging to progress cases efficiently.
Consumer Duty has come under scrutiny recently in the mainstream media. However, regulation is essential for enhancing industry practices, ensuring accountability, and promoting a consistent approach across firms. The handling of the bereavement process, which has been addressed to a varying degree across the industry as a whole in the past, has now, as a result of Consumer Duty, been given clearer guidance. The FCA’s report highlights best practice and shows how this topic is now being spoken about openly and properly, and how firms can make further improvements to ensure better outcomes for legal representatives and customers, including those in vulnerable circumstances, which is a welcome and positive step for all concerned.