15. Customer Vulnerability Flashcards

1
Q

What constitutes as a vulnerable customer?

A

Someone who due to personal circumstances is especially SUSCEPTIBLE TO DETRIMENT (particularly when a firm does not act with appropriate levels of care.

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2
Q

True or False - vulnerability can be temporary

A

True, can be temporary or permanent

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3
Q

True or False - having one of the following characteristics would deem a customer to be vulnerable:

  • Elderly
  • Disabled
  • Bereaved
A

False, they can be vulnerable whilst having these characteristics, but this is not necessarily always the case.

E.g. a blind person may be very capable within most circumstances and only vulnerable in particular situations

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4
Q

Ture or False - a firm’s actions can cause a person to become vulnerable.

A

True.

Example - Stress
- A firm may have in place a complexed telephone menu with no option to speak with a person. This can cause someone to become stressed, which can spiral and cause detriment, effecting their ability to function effectively.
- A firm may fail to record someone’s distressing circumstances and then cause the person stress by forcing them to repeat themselves.

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5
Q

What are the Four Key Drivers of Vulnerability?

A
  1. Health
  2. Life Events
  3. Resilience
  4. Capability

HERC

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6
Q

Provide examples of how someone’s health might lead to them becoming vulnerable. (5)

A
  1. Physical disability
  2. Severe long-term illness
  3. Hearing/Visual impairments
  4. Poor mental health
  5. Low mental capacity/cognitive difficulties
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7
Q

Provide examples of how someone’s life events might lead to them becoming vulnerable.(5)

A
  1. Caring responsibilities
  2. Bereavement
  3. Income shock
  4. Relationship breakdown
  5. Non-standard requirements - e.g. ex-offenders, care leavers, refugees
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8
Q

Provide examples of how someone’s resilience levels might lead to them becoming vulnerable. (5)

A
  1. Low/erratic income
  2. Over indebtedness
  3. Low savings
  4. Low emotional resilience
  5. Lack of support structure
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9
Q

Provide examples of how someone’s capability might lead to them becoming vulnerable. (4)

A
  1. Low knowledge/confidence in dealing with finance
  2. Poor literacy/numeracy skills
  3. Poor digital skills
  4. Learning Impairments
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10
Q

According to Fitch et Al (2017), vulnerability is made up of 3 intertwined factors or ‘strands’. What are the 3 strands they established?

A
  1. Individual factors
    - things relating to the individuals, e.g. health, capabilities
  2. Wider circumstances
    - things relating to the person’s situation or circumstances, e.g. life events, sudden household/social changes, benefit difficulties
  3. Organisational Action/Inaction
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11
Q

What is meant by over-indebtedness? How many people in the UK are over-indebted? How does this make people Vulnerable? Which of Fitch et Al’s Strands does this fit into? Which of the four drivers does this fit into?

A

means someone who finds MEETING MONTHLY FINANCIAL COMMITTMENTS A HEAVY BURDEN or is REGULARLY IN ARRERS with bills. These people tend to be vulnerable because they are more adverse to economic shocks, e.g. rising interest rates, unemployment, relationship breakdown.

17% of UK or 9 million people

Fitch et Al = wider circumstances

Four drivers = Resilience

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12
Q

In what way can lack of financial awareness or confidence with numbers/products make someone vulnerable? (5)

Which of Fitch et Al’s Strands does this fit into? Which of the four drivers does this fit into?

A
  1. Poor understanding of interest rates/whether a higher or lower APR is better.
  2. Not understanding product advantages/disadvantages leads to poor product choices
  3. Lack of confidence to question lender on T&Cs, unable to ensure product meets their needs
  4. Reduced ability to budget
  5. Reduced ability to shop around and access financial literacy.

Fitch et Al = Individual Factors

Four drivers = Capability

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13
Q

How many people in the UK are said to be unable to manage money properly?

A

more than 20 million

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14
Q

How many people in the UK have less than £100 in savings?

A

11.5 million

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15
Q

Identify the Fitch et Al strands within the following case study:

A customer has permanent hearing loss. The recent death of her husband has caused her extreme distress and confusion, which, in turn, has caused her to misplace her hearing aid. The bank fails to identify this and fails to provide support with filling in forms/providing explanations.

A

Hearing loss = individual

Bereavement & lost hearing aid = wider

Bank failures = Organisational inaction

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16
Q

What is an agent?

A

Someone who acts on behalf of someone who is deemed to be incapable of making decisions due to their mental health.

E.g. a lasting power of attorney

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17
Q

What are the main links between debt and mental health? (3)

A
  1. Debt increases the risk of poor mental health
  2. Debt can make mental health recovery harder
  3. Mental health problems can make financial recovery harder because people with poor mental health tend to have difficulty talking to creditors/debt advisors and they tend to have lower incomes too (unemployment, sick, reduced hours)
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18
Q

True or false - people with debt problems are twice as likely to develop depression.

A

True

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19
Q

What should banks do when dealing with people who have mental health issues? (1) What should they not do? (2)

A

DO
- Deal with them in a SYMPATHETIC, POSITIVE MANNER

DONTs
- pass debts on to a debt collector
- initiate court action unless it is as a last resort

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20
Q

What is the main UK law which protects individuals who are not able to make their own decisions?

A

The Mental Capacity Act 2005

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21
Q

How does the FCA’s Consumer Credit Sourcebook (CONC) define mental capacity? What is this based upon? (3)

A

Mental capacity = someone’s ability to make a responsible decision

determined by their ability to:
1. understand relevant info
2. remember relevant info
3. assess relevant info

22
Q

The FCA’s Consumer Credit Sourcebook (CONC) section 2.10.8 provides guidance to firms on likely indicators that would suggest a customer has limited mental capacity.

What indicators are outlined? (4)

A
  1. Making an OUT OF CHARACTER DECISION
  2. Demonstrating a LACK OF UNDERSTANDING re: what is being applied for
  3. Appearing UNABLE TO UNDERSTAND INFORMATION AND EXPLANATIONS - particularly relating to RISKS/BORROWING
  4. Appearing CONFUSED about some of the REQUIRED PERSONAL INFOR - name, DOB, address etc
23
Q

If a bank has a concern about the mental capacity of one of it’s customers, should they keep this confidential or raise the concern with a family/friend/carer/doctor?

A

Raise the concern with others.

24
Q

True or False - creditors are not allowed to collect any debt at all from customers who they either have been told has limited mental capacity to make decisions about debt or who they reasonably ought to believe has limited mental capacity to make decisions about debt.

A

True, they must suspend any debt collection from those with limited mental capacity

25
Q

What is the Lending Standards Board (LSB)’s and what are its Standards of Lending Practice (SLP)?

A

Firms have the option of voluntarily registering with LSB to show their commitment acting morally/responsibly.

Registered firms must adhere to SLP, which are best practice guides for lenders, particularly when dealing with vulnerable customers.

26
Q

What is the focus of CONC 1? How does this section relate to vulnerable customers.

A

Focus = application & purpose

Contains guidance on vulnerability indicators & 11 Principles for Business which firms must abide by

27
Q

What is the focus of CONC 2? How does this section relate to vulnerable customers.

A

Focus = Conduct of Business (COBS): General Standards

Contains info on treating customers fairly/not misleading them, such as, DONT:

  • Target customers with PRODUCTS UNSUITED TO THEM
  • engage in HIGH PRESSURE SELLING/AGRESSIVE BEHAVIOUR/COERCION
  • FAIL TO ALLOW SUFFICIENT TIME to make repayments
  • TAKE STEPS TO REPOSSESS HOMES (unless as a last resort)
28
Q

What is the focus of CONC 7? How does this section relate to vulnerable customers.

A

Focus = Arrears, default & recovery (inc repossessions)

arrears customers must be treated fairly, including those who are vulnerable.

29
Q

How many standards does the Lending Standards Board’s Standards for Lending Practice (SLP) contain? How many of these relate to vulnerable customers? What are they?

A

6 Principles in total.

Two relate to vulnerability, which are:
1. Consumer Vulnerability
2. Financial Difficulty

30
Q

With regards to the Lending Standards Board’s Standards for Lending Practice (SLP) what is the desired customer outcome with regards to customer vulnerability? (3)

How can these desired outcomes be achieved? (2)

A
  1. INCLUSIVE PRODUCTS & SERVICES
    - taking into account a broad range of customers
  2. Appropriate FLEXIBILITY to meet the needs of customers in a vulnerable situation
  3. Appropriate ADJUSTMENTS to ensure vulnerable customers’ circumstances are ACCOMODATED FOR so that they or an authorised third party can access their accounts

Achieved by….

  1. having SYSTEMS AND CONTROLS that IDENTIFY VULNERABLE CUSTOMERS
  2. having APPROPRAITE MEASURES, REFERRAL POINTS & SKILLED STAFF to deal with vulnerable customers
31
Q

With regards to the Lending Standards Board’s Standards for Lending Practice (SLP) what is the desired customer outcome with regards to financial difficulty? (1)

How can these desired outcomes be achieved? (4)

A

Desired outcome = Customers in financial difficulty or early stages of the collection process will receive APPROPRIATE SUPPORT & FAIR TREATEMENT ACROSS ALL COMMUNICATION CHANNELS so they can deal with their debt in most suitable way.

Achieved by…

  1. having POLICIES & PROCEDURES in place to IDENTIFY & SUPPORT vulnerable customers
  2. applying APPROPRIATE LEVELS OF FORBEARANCE when appropriate for the situation.
  3. CONSIDERING WHETHER PERSUING DEBT IS SUITABLE for customer’s circumstances
  4. Following a DUE DILLIGENCE process when CHOSING DEBT COLLECTION FIRMS.
32
Q

True or false - the FCA’s Fair Treatment of Customers contains rules regarding the treatment of vulnerable customers.

A

False

FTC is for ALL customers, no specific mention of vulnerable customers.

FTC also does not contain rules, only guidance, because rules encourage people to exploit loopholes rather than acting in best interest of customer

33
Q

According to the FCA’s Financial Lives Survey, what percentage of adults within the UK display 1 or more characteristics which would make them potentially vulnerable?

A

50%

34
Q

According to Fitch et Al (2017), what are the three levels of vulnerability? (3)

Which of these levels would someone with limited mental capacity or mental health problems fall into?

A
  1. Potentially Vulnerable
  2. Vulnerable
  3. Particularly Vulnerable - e.g. mental health problems, limited mental capacity
35
Q

According to Fitch et Al (2017), what is meant by someone who is ‘potentially vulnerable’?

A

Someone who is CURRENTLY ABLE to manage their finances & make informed financial decisions

But they are potentially vulnerable because their CIRCUMSTANCES MAY CHANGE (e.g unexpected health condition (individual), becoming a carer (wider), actions of the lender (organisational action) ).

Everyone has potential to be vulnerable

36
Q

According to Fitch et Al (2017), what is meant by someone who is ‘vulnerable’? What should firms do in relation to this type of customer? (3)

A

Someone who is CURRENTLY MORE EXPOSED TO HARM/LOSS/DETRIMENT THAN OTHER CUSTOMERS

Firms should:

  1. IDENTIFY THEM
  2. Provide HELP & ASSISTANCE to AVOID THE OCCURANCE of DETRIMENT
  3. RETURN THE CUSTOMER BACK TO POTENTIAL VULNERABILITY over time.
37
Q

According to Fitch et Al (2017), what is meant by someone who is ‘particularly vulnerable’? What should firms do in relation to this type of customer? (1)

A

Someone who is CURRENTLY AT A GREATLY HIGHTENED RISK OF DETRIMENT compared with the majority of customers in the vulnerable category (& detriment cause could also be a lot more serious)

Firms should:

  1. IDENITFY & ACT QUICKLY to avoid significant harm
38
Q

Fitch et Al (2017) ‘Vulnerability: a guide for debt collection’ has how many questions/steps? These steps are split into 3 categories, what are they?

A

21 steps

  1. Staff Actions (steps 1 - 11)
    - identifying vulnerability, handling disclosures, supporting customer, recording data etc
  2. Focused Support (steps 12-17)
    - specialist areas of vulnerability, e.g. mental health, suicide, bereavement, illness, addictions, supporting staff
  3. Organisational Development (steps 18-21)
    -training, monitoring quality, working with agencies, case studies
39
Q

Within Fitch et Al (2017)’s ‘Vulnerability: a guide for debt collection’, Step 4 is Ensure that disclosures are handled appropriately. How is a disclosure defined within this step? (2)

A

Defined by:

  1. Trust - customer’s ability to trust the organisation/staff
  2. Opportunity - an opportunity is presented to the staff member to better understand the customer
40
Q

What protocol model is used to ensure that disclosures are handled correctly? Describe the acronym and each of the steps.

A

TEXAS model

T - THANK the customer for sharing the information
E - EXPLAIN how the information will be used/whom it may be shared with
X - EXPLICIT consent must be obtained
A - ASK the customer key questions to better understand
S - SIGNPOST them to internal/external sources of help, e.g. Samaritans, NHS, debt advice agencies

41
Q

What are some examples of the sorts of key questions that could be asked when a customer has made a disclosure? (3)

A
  1. How does your situation make it difficult to manage your finances?
  2. How does your situation affect your ability to communicate with us?
  3. Does anyone help you manage you finances e.g. carer/relative?
42
Q

Within Fitch et Al (2017)’s ‘Vulnerability: a guide for debt collection’, Step 5 is Carer Disclosures.

What protocol model is used to ensure that disclosures are handled correctly? Describe the acronym and each of the steps.

A

C - CHECK for authority to act on customer’s behalf
They do = arrange more detailed discussion
They don’t = continue with rest of steps
A - AVOID discussing account details (& explain why this is not possible)
R - REASSURE that their concerns can still be recorded & looked into
E - EXPLAIN that their observations will need to be shared with the customer, colleagues & potentially new customers (carers need to give consent for this)
R - RECORD observations carefully and check that you understand
1. why customer is unable to speak
2. how their situation affects their ability to repay
3. that carer knows what is being recorded & how
S - SUMMARISE the next steps, e.g. speaking with the customer to establish the problem, carer getting authority to act on their behalf etc

43
Q

Within Fitch et Al (2017)’s ‘Vulnerability: a guide for debt collection’, Step 6 is Understanding Vulnerable Situations.

What protocol model is used with regards to vulnerable situations? Describe the acronym and each of the steps. And when is it suitable for this to be used?

A

I - IMPACT that the customer’s mental health has on their financial situation (provides insight on severity)
D - DURATION - how long has there been a problem? How much time will customer need to take back control of the situation?
E - EXPERIENCES - how many many experiences of poor mental health has the customer had? Is the situation likely to fluctuate?
A - ASSISTANCE - has the customer sought help for their condition in the past? Can this information provide evidence of the customer’s mental health situation to the lender.

Short version:
IMPACT - What happens? How bad?
DURATION - How long has it been/will it be going on?
EXPERIENCES - Has it happened before? Could it happen again?
ASSISTANCE - Are they getting help?

Used for when a MORE DETAILED UNDERSTANDING IS NEEDED than that which can be gained using the TEXAS model.

44
Q

Which protocol model can be described as a ‘conversational compass’? What does this mean?

A

IDEA protocol

Staff need to use their soft skills - let the customer talk and listen out for relevant information. Only ask follow up questions if further information is required.

45
Q

True or False - FCA’s CONC & LSB’s Standards of Lending Practice guidance regarding vulnerable customers only applies for face-to-face delivery.

A

False - this guidance should be considered across all delivery channels.

46
Q

True or False - someone who does not have access to the internet could be considered a vulnerable customer.

A

True - there is risk of harm resulting from them not being able to access digital services.

47
Q

How can using digital channels help vulnerable customers? (3) How might they hinder customers? (1) How can this be overcome?

A

HELP
1. Choice of communication options
2. Should not have to repeat themselves - effective recording systems
3. Information gathered can be shared internally (including with frontline staff)

HINDER
1. Lack of personal contact can be confusing - e.g. complex phone menus
- can be overcome by using webchat facilities with video call options.

48
Q

How can robo-advice tools be used to help vulnerable customers?

A

They can flag support available from a human advisor if certain behaviours are detected such as:

  1. Hovering for a long time before inputting info
  2. Pressing help buttons
  3. Entering inconsistent info
49
Q

What are some methods which the FCA suggest firms use for delivery of good customer service to vulnerable customers? (5)

A
  1. REMOVE TARGET TIMES from phonecalls
  2. Give staff ability to ADJUST SERVICE STANDARDS (within limits) to suit the needs of the customer
  3. Support the customer to ARTICULATE THEIR NEEDS & NECESSARY ADJUSTMENTS
  4. Empower the customer to TAKE ACTIONS to support them at times of low capacity (e.g. spending limitations on cards)
  5. Allow them to DESIGNATE A THIRD PARTY to support with interactions

THINK: TAAAT

50
Q
A