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CCR2 Affordability Assessments & Vulnerability How to define and respond

What ‘good looks like’ in terms of vulnerability is a complex question, requiring a developed strategy to properly answer

Fiona Hoyle

Head of consumer and mortgage finance, Finance & Leasing Association

For creditors, customer vulnerability is one of those concepts that is both incredibly simple and incredibly complex. It is simple, in the sense it does not take a great deal of imagination, to recognise that some customers will experience events, or circumstances, that affect their ability to manage their affairs, including their financial arrangements, bereavement, divorce, growing old, and ill health. These are common aspects of human experience. It is not hard to see they may require lenders to adjust their approach.

Complex challenges

But – as consumer-credit firms have long recognised – simple concepts often mask complex operational challenges. So, what is vulnerability and how do you spot it? What do you do when you have spotted it? How do you build the necessary flexibility of approach into systems and controls that are also designed to ensure compliance with statutory and regulatory requirements? What resources for training, governance and implementation are needed? And what will these cost? In a nutshell, how do you address a simple concept in a complex world?

Vulnerability is not a new concept for consumer-credit firms. It appeared in regulatory guidance as far back as 2001, in the standards expected of debt-management firms. More recently, the Financial Conduct Authority published an occasional paper in 2015, which put more flesh on the bones, and developed the concept of customers who might be ‘potentially vulnerable’. The paper also led to a much more open debate and exchange of ideas about ‘what good looks like’ when firms seek to assist vulnerable customers.


In early 2016, the FLA and The UK Cards Association asked the University of Bristol’s Personal Finance Research Centre to conduct research into current practices in the market, so as to find practical solutions that firms could use to identify and support those customers in need of extra help. Led by Chris Fitch from the Institute of Psychiatry, Psychology and Neuroscience’s doctoral programme at Kings College London, the researchers spoke to 1,600 frontline staff in the credit industry. The aim was to identify measures which would be both commercially realistic and easy-to- follow. This was a tall order, considering that vulnerability spans the entire spectrum of health, social and financial challenges. The first part of the team’s report, Vulnerability and Collections: New Data, New Steps, will be published on 21 March 2017, and will focus on the collections sector. Covering mental health, serious physical and terminal illness, bereavement, suicide, addictions, and a range of other vulnerable situations, the report will propose a series of

But – as consumer-credit firms have long recognised – simple concepts often mask complex operational challenges

practical steps that firms can adopt in order to improve the help they give customers in vulnerable situations. It will also illustrate these with case studies.

The final part of the team’s report will be published in June 2017, and will look at new approaches which firms can use to identify vulnerability early in the lending process, including lending delivered on-line or via brokers and other intermediaries. CCR2

March 2017

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