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14 February 2024

Firms across financial services are both at risk of alienating consumers – by obtaining vulnerability data without their knowledge – and by not engaging directly with the consumer, vulnerability experts at MorganAsh have said.

Under Consumer Duty, firms are required to identify and assess vulnerable customers – and monitor outcomes across the lifetime of products. Some manufacturers, particularly credit companies, are trying to obtain vulnerability data by using external sources such as credit scores and socioeconomic data.

However, Andrew Gething, managing director of support services provider MorganAsh, argues that this approach could mean judgments are made about consumers’ vulnerabilities behind their backs. Since this runs the risk of alienating clients, Gething suggests that firms should instead engage directly with the consumer. It’s a similar warning for those firms in the distribution chain which are reporting few – or even zero – vulnerable customers.

Andrew Gething said: “Many companies are trying to distil vulnerability data from credit scores or socioeconomic analyses. For example, some indicators of a consumer using gambling websites may be obtained through open banking data. While this may be useful information, it runs the risk of alienating consumers – because the data is obtained through the back door, without their awareness. When considering how to obtain data, the priority should be on its use to reduce harm, not the simplest way to obtain it.

“Since engaging with consumers is an important part of managing vulnerability, making a decision based on inferred or indirectly sourced data has the potential to scare consumers – because these judgments are made behind their back. Just as worrying is the number of firms across the distribution chain still claiming they don’t have any vulnerable customers – this simply isn’t possible, and speaks more to both a lack of engagement and a lack of good-quality assessment data. Not only do firms run the same risk of alienating clients, they could also fall foul with the regulator when it enforces Consumer Duty.

“In our twenty plus years’ experience of assessing vulnerable people, we have always found that it is best to go to the consumer and engage directly with them on their issues. This early disclosure is more likely to lead to remediation – or, at the very least, to an adapted engagement process which is better suited to their needs.”

The caution comes as the FCA continues its review into the progress made by firms to meet its vulnerability requirements. It also follows concerns raised by the FCA that many firms were just “repackaging existing data”, as well as its recent survey, which found that many firms were still implausibly reporting few or even zero vulnerable customers.

This is in contradiction to the FCA’s own Financial Lives survey, which revealed that around half of all UK adults are vulnerable in some way. Firms assessing consumer vulnerability using the MorganAsh Resilience System (MARS) – with its objective Resilience Rating – have recorded results consistent to those of the regulator’s. The Resilience Rating is comparable to a credit score – but for vulnerability – and is generated following the completion of the MARS online assessment.

Andrew adds: “For any organisation managing vulnerability, there is a need to have a consistent way to assess, monitor, communicate and evaluate who is vulnerable. In addition, firms need to be able to assess both the level and severity of the vulnerability to ensure the appropriate actions can be implemented consistently.

“Without an objective way to assess, record and monitor different vulnerabilities there will always be issues with subjectivity and consistency. As a result, it will be very difficult to scale services and share data, which should be the aim –– streamlining this process and improving services for vulnerable customers in particular.”

To find out more or access a free trial, visit: morganash.com/mars or phone: 0330 159 8162.