Vulnerable customers: building a credible identification framework
The FCA's finalised guidance FG21/1, Guidance for firms on the fair treatment of vulnerable customers, sets out the regulator's expectations in detail across four key areas: understanding the needs of vulnerable customers, the skills and capability of staff, product and service design, and customer communications and engagement. The guidance predates the Consumer Duty but remains the primary reference point for the vulnerability aspects of Consumer Duty compliance, sitting alongside PRIN 2A and the consumer support outcome. Firms that have not reviewed their vulnerability frameworks since FG21/1 was published should treat this as an urgent gap to address.
The FCA's definition of vulnerability is deliberately broad, covering four drivers: health conditions or illnesses that affect a person's ability to carry out day-to-day tasks; life events such as bereavement, job loss, or relationship breakdown; resilience, including low emotional resilience or low ability to withstand financial or emotional shocks; and capability, covering low knowledge of financial matters or low confidence in managing money. The definition is deliberately inclusive — it covers both permanent and temporary states, and recognises that vulnerability is not a fixed characteristic. The FCA expects firms to design their services so that they are appropriate for the full spectrum of customers who may use them, including those experiencing any of these drivers.
Identification of vulnerable customers is a particular practical challenge. Many vulnerability drivers are invisible to the firm unless the customer discloses them, and customers are often reluctant to disclose. FG21/1 does not require firms to identify all vulnerable customers individually — it requires firms to understand the characteristics of their customer base, identify the proportion likely to be vulnerable, and design products, services, and communications accordingly. Proactive identification — for example, through frontline staff training on recognising vulnerability indicators, or through digital journey design that makes it easy for customers to flag support needs — is expected where this is proportionate.
Staff capability is a critical enabler. Firms must ensure that customer-facing staff can recognise signs of vulnerability, have the authority to exercise flexibility in their response (for example, by extending deadlines, waiving charges, or escalating to specialist teams), and are not penalised commercially for doing so. A common failing identified in the FCA's thematic reviews is the existence of well-designed vulnerability policies that are undermined by incentive structures or operational processes that create barriers to appropriate treatment. Firms should test whether their actual customer outcomes for potentially vulnerable customers are consistent with their stated policy.
Monitoring and evidencing outcomes
Under the Consumer Duty, firms must be able to evidence that vulnerable customers are achieving outcomes as good as those of other customers. This requires data collection and analysis: tracking whether vulnerable customers are more likely to experience adverse outcomes, withdraw from products, cancel services, or submit complaints. Where analysis reveals worse outcomes for identifiable groups of potentially vulnerable customers, firms must investigate and address the root cause. Board-level oversight of vulnerability outcomes data is expected as part of the annual Consumer Duty board report.