Responsible finance providers are role models for how to treat customers who experience vulnerability

Posted On: 
23rd November 2018

The wider financial services sector can look to the responsible finance sector as a role model for how to treat customers, especially those who experience vulnerability, says Responsible Finance. 

17% of UK adults have low financial capability, 30% have low financial resilience, 19% of consumers say a major life event has happened to them or their partner in the last 12 months and 5% of UK adults say their ability to carry out day to day tasks is reduced a lot by health conditions or illness.

There is a growing focus in the financial services industry on the importance of fair consumer outcomes. The Financial Conduct Authority defines vulnerability as ‘someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care’. It has explicitly stated that it expects firms to pay attention to indicators of potential vulnerability and to have policies in place to deal with consumers who may be at greater risk of harm. Responsible finance providers do this as standard because of the nature of their businesses.

Responsible finance providers provide finance and financial capability support to consumers and microbusinesses that are often low-income or experience vulnerability. Because of this, they have strong and appropriate vulnerability policies in place and offer their customers an empathic and flexible service. They treat customers fairly and aim to generate positive outcomes for their customers throughout the lifetime of the loan, and beyond, by offering advice and wraparound services.

Responsible lending means not approving a loan that will make a consumer worse off, and directing that individual to appropriate support. Responsible finance providers exercise forbearance when consumers encounter difficulty repaying their loan, and work with the individual to establish a new repayment plan. Responsible finance providers signpost loan applicants who exhibit high levels of debt, as well as some existing customers whose circumstances change and their debt becomes unsustainable, to debt advice, where requesting a breathing space may be a suitable option.

Whether it is an individual, business or social enterprise, responsible finance providers always treat cases of insolvency fairly and with sensitivity.

In responsible finance providers’ experience, people want to resolve their debt issues but do not have the time to think or seek advice which means that hasty decisions are made, repayment plans are accepted that are unaffordable and not sustainable, or they ignore creditors. This can result in more anxiety and stress for the debtor and creditors having to take further action to resolve arrears – adding cost to the recovery process.  In responsible finance providers’ experience, it is extremely rare for a borrower to suddenly decide they do not wish to pay their debt.

Responsible Finance welcomes the FCA’s recent Approach to Consumers paper and its consultation on implementing a Duty of Care. It also welcomes the Treasury Select Committee’s inquiry on consumers access to financial services, which focuses in particular on the provision of financial products and services for vulnerable consumers. We believe that the wider financial services sector can look to the responsible finance sector as a role model for how to treat customers, especially those who experience vulnerability.