15. Customer Vulnerability Flashcards
What constitutes as a vulnerable customer?
Someone who due to personal circumstances is especially SUSCEPTIBLE TO DETRIMENT (particularly when a firm does not act with appropriate levels of care.
True or False - vulnerability can be temporary
True, can be temporary or permanent
True or False - having one of the following characteristics would deem a customer to be vulnerable:
- Elderly
- Disabled
- Bereaved
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
Ture or False - a firm’s actions can cause a person to become vulnerable.
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.
What are the Four Key Drivers of Vulnerability?
- Health
- Life Events
- Resilience
- Capability
HERC
Provide examples of how someone’s health might lead to them becoming vulnerable. (5)
- Physical disability
- Severe long-term illness
- Hearing/Visual impairments
- Poor mental health
- Low mental capacity/cognitive difficulties
Provide examples of how someone’s life events might lead to them becoming vulnerable.(5)
- Caring responsibilities
- Bereavement
- Income shock
- Relationship breakdown
- Non-standard requirements - e.g. ex-offenders, care leavers, refugees
Provide examples of how someone’s resilience levels might lead to them becoming vulnerable. (5)
- Low/erratic income
- Over indebtedness
- Low savings
- Low emotional resilience
- Lack of support structure
Provide examples of how someone’s capability might lead to them becoming vulnerable. (4)
- Low knowledge/confidence in dealing with finance
- Poor literacy/numeracy skills
- Poor digital skills
- Learning Impairments
According to Fitch et Al (2017), vulnerability is made up of 3 intertwined factors or ‘strands’. What are the 3 strands they established?
- Individual factors
- things relating to the individuals, e.g. health, capabilities - Wider circumstances
- things relating to the person’s situation or circumstances, e.g. life events, sudden household/social changes, benefit difficulties - Organisational Action/Inaction
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?
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
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?
- Poor understanding of interest rates/whether a higher or lower APR is better.
- Not understanding product advantages/disadvantages leads to poor product choices
- Lack of confidence to question lender on T&Cs, unable to ensure product meets their needs
- Reduced ability to budget
- Reduced ability to shop around and access financial literacy.
Fitch et Al = Individual Factors
Four drivers = Capability
How many people in the UK are said to be unable to manage money properly?
more than 20 million
How many people in the UK have less than £100 in savings?
11.5 million
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.
Hearing loss = individual
Bereavement & lost hearing aid = wider
Bank failures = Organisational inaction
What is an agent?
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
What are the main links between debt and mental health? (3)
- Debt increases the risk of poor mental health
- Debt can make mental health recovery harder
- 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)
True or false - people with debt problems are twice as likely to develop depression.
True
What should banks do when dealing with people who have mental health issues? (1) What should they not do? (2)
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
What is the main UK law which protects individuals who are not able to make their own decisions?
The Mental Capacity Act 2005