Are banks and lenders going far enough on vulnerability?

With the arrival of Consumer Duty – which came into force back in July – all areas of financial services are considering how to best identify and look after vulnerable clients.

In an intermediated market, there’s also further consideration as to how vulnerability is defined, recorded and shared consistently among all relevant parties. This is particularly pertinent for banks or lenders and their broker partners – ensuring that any processes put in place to capture, share and act upon this data will genuinely deliver good outcomes for the consumer.  

Just recently, we’ve seen two major banks – Halifax and Metro Bank – step forward with their own approaches to supporting vulnerable customers. These include online hubs, phonelines and making resources available to brokers. We must applaud their efforts – not just for their progress on vulnerability, but for recognising the need for brokers to share when they have vulnerable clients.  

However, do these vulnerability measures go far enough? While delivered with the best of intentions, there are still potential weak spots which could lead to poor outcomes. 

The scale of vulnerability

Across financial services, there remains a lack of appreciation for the scale of consumer vulnerability. As part of its Financial Lives survey, the FCA reported that 52 per cent of UK adults (27.3m people) were classed as having one or more characteristic of vulnerability. 

With the vulnerability solutions offered by lenders including either a phoneline for brokers, or calls directly to vulnerable clients, it’s safe to say that those phonelines will be extremely busy if the customer base is even remotely close to the FCA’s findings. Will a busy broker have the bandwidth to call the lender to report and discuss each and every customer’s vulnerability – let alone a lender having the capability to call more 50 per cent of their customers? In some cases, is that even appropriate?

Inconsistencies 

We mustn’t forget that vulnerability is not a binary issue. Instead, there are a wealth of characteristics and circumstances that can attribute to a customer’s vulnerability. By our count, there are more than 400 variations. It’s therefore not impossible that both the lender and the broker have differing opinions on the prevalence and severity of a vulnerability. What happens in this instance?

Brokers using the Halifax system will also receive a call-back from a member of its vulnerability team to discuss the matter further. While this is a positive, it does require both the broker and the agent to have comprehensive training to clearly identify all manners of vulnerability. The Metro Bank system asks brokers to add concerns to applications – which not only faces similar issues, but creates inconsistencies in reporting and headaches for those trying to act upon the information. 

Lack of technology

In reality, technology is playing a critical role in helping firms of all sizes meet the requirements of Consumer Duty. In fact, software is already available to measure vulnerability objectively and consistently, with little input needed from advisers or lenders. It can also provide uniform reporting – so that information can be shared and acted upon to ensure compliance and the best possible outcome. 

Using MARS (the MorganAsh Resilience System) as an example, vulnerability assessments generate an objective Resilience Rating – much like a credit score. Then, rather than using a phoneline or submitting case notes, users can send a MARS certificate to the lender, or generate a full characteristics report if further information is required. 

I must stress my intention is not to bash the efforts of those making progress with vulnerability. All progress is good. However, with the greater requirements of Consumer Duty, any system put in place needs to answer the demands of the market: how will it be consistent, how will information be shared, how will the monitoring requirements be met – among others.  

Most importantly though, how will it ensure that vulnerable customers are identified, supported and ensured the best possible outcome. To my mind, this can only really be achieved through integrating technology – especially at the scale required for major banks and lenders.