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3.5

Vulnerable Customers

The FCA defines a vulnerable consumer in its 2017/18 Business Plan 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’.

Sales Procedure Guide

Home
3.1 | Disclosures
3.2 | Financial Promotions
3.3 | Consumer Duty
3.4 | Affordability
3.5 | Vulnerable Customers
3.6 | Anti-Money Laundering
3.7 | Complaints
3.8 | Data Protection
3.9 | Training
3.10 | SMCR Framework
3.11 | Commiunication with the Regulator
Evolution’s Approach
There are seven key recommendations of the CONC sourcebook (CONC 2.10G) that stand out to us (under Principle 6) when dealing with all our customers:
We presume that all customers have the mental capacity to make a decision about the loan unless anything indicates otherwise (CONC 2.10.4G).
We will act on knowledge (past or present), observations, belief or suspicion that a customer has a limited mental capacity (CONC 2.10.125G, 2.10.5G, 2.10.8G).
We will provide support (where possible) to the customer to make a decision following identification (e.g. more time, more transparent information) (CONC 2.10.12G).
We are aware that mental capacity and mental illness differ (CONC 2.10.6G).
Our policies and procedures are in place to manage customers with capacity limitations (new and arrears customers) (CONC 2.10.10G).
We accommodate all communication channels, including telephone, face-to-face, and online (CONC 2.10.14G).
Customers are allowed to make unwise decisions, but they have a right to be protected when they are unable to make these decisions, and we endeavour to help them with this (CONC 2.10.13G).
At Evolution Funding, we make our staff aware that any customer can be vulnerable at any time for one or many reasons, be they financial reasons, coercion, lack of understanding, etc.

This can include examples such as:

  • Mental or physical infirmity.
  • Learning difficulties.
  • Illiteracy or if English is not their first language.
  • Recent change of circumstances, e.g. financial, bereavement, divorce.

Through day-to-day and formal training, we work with our staff to identify, support and protect potentially vulnerable customers. We also have a programme to monitor the way we handle those customers.

We will ensure access to all our products and services is equal to all persons whilst weighting responsibility towards ensuring that people who are considered vulnerable are appropriately supported and advised. Should this situation arise and it becomes evident that the information we provide to the customer is not being understood, we will ask the customer to request the involvement of a trusted friend or relative before proceeding.

A customer can be classed as vulnerable and susceptible to detriment at any point in the customer journey, including but not limited to the application process, sign-up, pre-qualification call, pay-out security call, complaints and collections. Your Account Manager is your point of contact for overseeing any remedial action required from identifying a vulnerable person that may involve your dealership.

We use recognised frameworks to train and assist our staff in identifying potentially vulnerable customers and helping them appropriately handle those customers.

We also complete security calls on a significant percentage of our customers, including those we identify may require enhanced due diligence due to their age, occupation, or level of borrowing.

Through these calls, we confirm details of the agreement with the customer and establish if they fully understand the loan, that it is affordable to them, and that they are happy to proceed.

Drivers of Vulnerability

All customers risk becoming vulnerable due to changes in circumstances or characteristics, which can lead to additional or different needs and may limit their ability or willingness to make decisions and choices or represent their interests.
The FCA, in their Finalised Guidance on the fair treatment of vulnerable customers, identifies four key drivers of vulnerability:
  • Health – conditions or illnesses affecting the ability to carry out daily tasks.
  • Life events – such as bereavement, job loss or relationship breakdown.
  • Resilience – low ability to withstand financial or emotional shocks.
  • Capability – low knowledge of financial matters or low confidence in managing money (financial capability). Low capability in other relevant areas, such as literacy or digital skills.

Health

Life Events

Resilience

Capability

Physical disability
Retirement
Inadequate (outgoings exceed income) or erratic income
Low knowledge or confidence in managing finances
Severe or long-term illness
Bereavement
Over-indebtedness
Poor literacy or numeracy skills
Hearing or visual impairment
Income shock
Low savings
Poor English language skills
Mental health condition or disability
Relationship breakdown
Low emotional resilience
Poor or non-existent digital skills
Addiction
Domestic abuse (including economic control)

—

Learning difficulties

Low mental capability or cognitive disability

Caring responsibilities

—

No or low access to help or support

Health

Physical disability
Severe or long-term illness
Hearing or visual impairment

Mental health condition or disability

Addiction

Low mental capability or cognitive disability

Physical disability

Life Events

Retirement
Bereavement
Income shock
Relationship breakdown
Domestic abuse (including economic control)
Caring responsibilities

Resilience

Inadequate (outgoings exceed income) or erratic income
Over-indebtedness
Low savings
Low emotional resilience
—
—

Capability

Low knowledge or confidence in managing finances
Poor literacy or numeracy skills
Poor English language skills
Poor or non-existent digital skills
Learning difficulties

No or low access to help or support

Vulnerability

As an approved dealer, you should be able to demonstrate to us, if required, that you take steps to identify potentially vulnerable consumers and that you will work with us to ensure you do not inappropriately sell finance to them.

Where lenders do not identify vulnerability, this can lead to customer detriment, including borrowing and lending that results in ‘later downstream’ financial difficulty and problem debt.

You should be aware that some consumers may not ask questions about the finance they are offered because they lack confidence or fear embarrassment. You have a responsibility to ensure consumers fully possess all the facts.

This not only benefits consumers, but it could potentially reduce the number of cancelled finance agreements.

Evolution Funding uses a protocol called BRUCE to assist our staff in spotting indicators of potential vulnerability.

If you ever have any concerns about a customer or potential customer at any point, please get in touch with your Account Manager.

For further reading, we recommend the following papers on consumer vulnerability:

The FCA has recently published their final guidance to help firms in the fair treatment of vulnerable customers. Details of the guidance can be found through the link below:
View FG21/1

The TEXAS Protocol

T

Thank the customer (what they have told you could be helpful for everyone involved):

“Thanks for telling me about your situation, as it will help us take this into account”.

E

Explain how the information will be used (it is a legal requirement):

“Let me explain how we’d like to use that information so you know”.

This explanation should include why the information is being collected, how it will help decision-making, and to whom the data will be shared/disclosed.

X

Explicit consent should be obtained (it is a legal requirement)::

“I just need to get permission to…”

A

Ask the customer questions to get essential information (these will help you understand the situation better):

“How does your situation make it difficult to manage your finances?”

“How does your situation affect your ability to communicate with us?”

“Does anyone help you manage your finances, such as a carer, relative or third party?”

S

Sign-post or refer to internal and external help (where this is appropriate):

At this point, staff and organisations might:

Need to internally refer the individual to a specialist team/staff member in their organisation

Want to consider external sign-posting to an organisation such as:

  • A free debt advice agency
  • NHS 111 (dial 111) for more help with a health problem
  • The Samaritans (116 123) for suicidal or despairing people.

Next // Anti Money-Laundering and Fraud Prevention

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