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Welcome guidance on fair treatment of the vulnerable consumer

The VRS welcomes the recent announcement by the Financial Conduct Authority, of its renewed commitment to help the vulnerable protect themselves from financial harm – on this occasion, with a new consultation on guidelines for firms dealing with vulnerable consumers. The guidance does not so much provide a checklist of required actions as various options for ways to comply with the principles set out – a flexible approach which recognises the variety of organisations who deal with the vulnerable, and one which we hope will encourage the improved outcomes we all want.

The FCA has not stinted in its expectations, however, and rightly so – indeed the paper makes plain that not only is more action needed, but that improved results must be demonstrable. “Ultimately,” the paper explains, “we want to see firms doing the right thing for vulnerable consumers, and embedding this in their culture.” That means they need “to be more focused on ensuring that the outcomes experienced by vulnerable consumers are at least as good as those of other consumers.” It’s an ambitious goal, as those working to improve treatment of vulnerable consumers know all too well, but it’s one to be celebrated.

So what does it look like in practice?

The guidelines are clear that consumers need to be confident they are dealing with firms where the fair treatment of customers is central to their corporate culture. In part, that means they must be provided with clear information and kept appropriately informed before, during and after the point of sale – and, when they do receive advice, it should take appropriate account of their circumstances. This is the VRS’ reason for being: we’re here not to try and make decisions for vulnerable consumers or the commercial organisations they interact with, but to encourage better decision-making by ensuring they have appropriate knowledge of who they’re dealing with. If we can help firms looking to meet their social obligations in this way, we’re only an email or phone call away.

As the FCA consultation sets out, it’s also essential that consumers don’t face unreasonable post-sale barriers if they want to change products, switch provider, submit a claim or make a complaint. This is especially important for the vulnerable, because where an act of financial self-harm has been undertaken by a vulnerable person and identified in good time, there ought to be a straightforward route to having it rectified – and if lenders and creditors don’t already have such mechanisms in place, it’s only right they should heed this reminder. If those unfortunate decisions can be avoided in the first place, there’s less need to go down that road.

The VRS agrees with the FCA that there are many different drivers of vulnerability, many of which can place people at risk of problem debt or other forms of financial harm. The FCA defines a vulnerable consumer as “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”. We don’t attempt to define vulnerability at all – we tend to think vulnerable people and their carers are the best judges of that, and leave it to them to register with the VRS as they see fit. Vulnerable people are not always best identified at a glance by strangers – vulnerability is a more subtle condition than that, to which ultimately we are all susceptible. Vulnerable people are our friends, our family, and our neighbours – indeed they are all of us at some point in our lives – so let’s empower them to protect themselves when it comes to the potentially very serious distress of financial hardship.

It’s clear that plenty of firms already have policies and processes in place to ensure fair treatment of vulnerable consumers, and there’s been good progress made by some, to whom a good deal of credit is due. But in order to ensure they’re not doing less than they believe, they need to know who they’re dealing with at a given moment, and whether that person may be in a vulnerable condition – and we only know that by asking the vulnerable themselves whether they wish to make it known.

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Destitution, vulnerability and debt: a combination to be wary of

Destitution, vulnerability and debt: a combination to be wary of

It may seem obvious that those facing destitution can be deemed vulnerable – but sometimes, when someone goes out and does the research, we actually get a clear look at the troubling reality. And, when we do, it can help guide us in our attempts to improve matters.

A new report by Christians Against Poverty shows that large proportions of those considered destitute – meaning they have trouble covering the basic necessities of life, like meals or a home – also experience one or more measurable form of vulnerability. Of the 1.5 million people in the UK facing destitution, 34% do so while also managing the pressures of lone parenthood; one fifth have a diagnosable learning difficulty; and a striking 62% suffer from mental ill-health.

There are sobering stats to consider, too, on how people in such conditions try to cope. More than half the destitute households surveyed, at 53%, had taken on debt to cover basic living expenses like a utility bill. What’s more, those suffering destitution are more likely to end up taking on forms of debt which can be punitively expensive. The report finds for instance that 40% of those borrowing from payday lenders had experienced destitution, as had 42% of those taking on debt from a doorstep lender.

This is sadly a very effective way of making a dire situation even worse – and harder to retrieve – and when people in these circumstances are in less acutely desperate straits, they tend to recognise this all too well. Where we are faced with the imminent prospect of going without food, heat or shelter – or, worse still, our children are – we naturally think in the short term.

The reality is, though, that people who are measurably destitute are frequently not good candidates for commercial credit agreements – and they need an opportunity to make that known to potential lenders when not in a state of immediate desperation. We all know what it’s like to feel the only thing that matters is getting something over the line – but in most cases that desperation will have paled in comparison to that of people who are struggling to feed their own children.

What’s needed here is a simple and effective way for vulnerable people at risk of destitution to protect themselves from unmanageable debt, before the moment of abject crisis arises. With that insulation from their own potential panic response – which comes laden with so much risk of things spiralling out of control – safer and more long-term approaches to income and debt management can be considered.

The Vulnerability Registration Service (VRS) gives people that option. People facing these difficulties – or any others they feel could place them at risk of unmanageable debt – can opt themselves out from that risk of making matters worse when those desperate moments strike. By signing up to the VRS, people can make lenders aware that they’re going through a period of vulnerability which should be taken into account in decisions over lending. It’s entirely voluntary, and any user can see who their information is shared with. Then, when matters improve, it’s a straightforward process to withdraw.

If you’d like to know more about the Vulnerability Registration Service, please see here for some frequently asked questions.

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Energy UK on vulnerable consumers

In 2018, Energy UK launched the Commission for Customers in Vulnerable Circumstances, to explore how customers in vulnerable circumstances could be provided better energy services in the future. The report has now been published, following a year of evidence gathering and engagement with stakeholders, and has identified seven key themes including an end to inadequate and inconsistent service, and a comprehensive regulatory framework with timely support and protection.

The report also calls for an easy identification of needs and access to support from energy suppliers, arguing that it should be easy for customers to disclose information about any vulnerabilities, with security and privacy respected, and to be given effective support.The VRS warmly welcomes this call, which mirrors the work that we are doing to support financially vulnerable consumers. It acknowledges the difficulty that energy suppliers face identifying a customer’s vulnerability, something that the VRS helps businesses to address, saying that eight out of ten customers would not tell a company if they were in a potentially vulnerable situation. The VRS helps to reduce the barriers that prevent customers disclosing information about their needs, partly by removing the concern that it will impact on future decisions made about their financial circumstances.

We are encouraged that the energy industry has acknowledged the need to improve standards in this area, and is taking active steps to do so, and look forward to working with the industry to support them in their endeavours.

The report can be read in full here

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Loneliness Awareness Week

VRS applauds the work being done by the Marmalade Trust to promote Loneliness Awareness Week this week, which is intended to increase awareness and reduce the stigma of loneliness.

VRS agrees that there needs to be more recognition of loneliness within our society, and more support offered to those in need. A new YouGov poll shows that not wanting to burden others is the main reason people avoid reaching out to seek help when feeling isolated, with 75 per cent of people saying they didn’t tell anyone despite having someone they could count on. There are some wonderful charities supporting this vulnerable sector of the population though, and some fantastic new initiatives to encourage people to reach out to lonely residents in their area. West Coast Virgin Trains designated all coach C’s on their trains as “chat carriages for the day last Friday, and in the North East there is a #chatty bus scheme, with a team riding buses to combat loneliness.

Loneliness can affect anyone, at any stage of their life, and have a hugely negative impact on health and well-being. Sadly it can also mean people are more financially vulnerable, with loneliness increasing the risk of an individual being targeted by unscrupulous predators, including financial scammers.

For some people, their most significant form of social contact comes from communication with cold callers, and unfortunately scammers, and as a result a relationship can develop that is, both financially and emotionally, deeply detrimental to the individual. A register such as the one that the VRS can provide some protection for these vulnerable consumers, ensuring that credit providers are aware of their circumstances. We will continue to support organisations working with the loneliest in society, and welcome their work in this area.

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CAP publishes ‘Stacked Against’ report

The debt charity Christians Against Poverty (CAP) have recently published a hugely insightful report on vulnerability, ‘Stacked Against’. It looks at the overuse of the term by companies and financial organisations, meaning that too many people are labelled as vulnerable, and those who are truly desperate are getting overlooked.

Whilst they welcome support for vulnerable consumers, the charity calls for a move beyond labels and silos, and a better understanding of the complexity of people’s lives and the wide variety of difficult situations that people face. They give the example of some utility companies regarding all households with a child under five as vulnerable, which in the majority of cases is a world away from someone with mental health problems or a terminal illness. The research found that the greater number of separate issues suffered simultaneously, the increasingly fragile their situation becomes.

CAP’s report researched the links between fourteen different additional difficulties faced by their debt clients. They included caring for a loved one, unemployment, poor mental health, childhood trauma and lone parenting. It found that nearly seven in ten (67%) are facing two or more issues and half are living with three or more. It also notes that while the presence of vulnerability does not guarantee financial difficulty will be present, vulnerable circumstances often have a financial impact. It notes that 735 of people helped by CAP said debt made them ill.

The report notes that it is important to appreciate the dynamics of vulnerability and that it is not a permanent state, but can be enduring, meaning that support needs to be provided for as long as is required.

They call for flexible, joined up solutions, and simple and accessible services, which is what the VRS are looking to provide for consumers, allowing them or their carers to identify themselves as financially vulnerable for however long a period that they require.

The VRS is delighted to be supporting CAP in their CAP Fresh Start Group, and welcome the important contribution to the vulnerability debate that their report makes.

The report can be read in full here

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How can we protect the vulnerable from scams and fraud?

As we age, it is a fact that we are more likely to experience circumstances that increase the risk of vulnerability, be it bereavement, cognitive decline or physical difficulty with daily living. As a result it becomes harder for these vulnerable consumers to protect themselves from fraud. Although anyone can fall prey to a scam, regardless of age, gender or economic background, older people are often targeted by particular scams and may be especially at risk because of their circumstances. Someone who has been successfully scammed is often targeted repeatedly.

According to Age UK, the average age of mail scam victims is 74, and over half of people aged 65+ believe they have been a target of a scam, with the majority of fraud incidents relating to bank and credit card fraud. A third of older people who fell for a scam may have lost £1,000 or more.

For anyone, but perhaps particularly an older person, a scam can have a terrible financial and emotional impact, with people losing their entire life savings. Whatever the amount though, such a situation can impact a person’s physical and mental health.

The link between age and vulnerability has to be acknowledged and understood by credit providers. That said, we must remember that neither age nor disability should automatically be equated with vulnerability. Many older people are more than capable at managing their financial and personal affairs, and would not wish to be seen as vulnerable.
We believe at the VRS that financial institutions should improve efforts to identify customers at risk of fraud and scams, and find more effective ways to help people to protect themselves from it happening to them. One of the ways available to them is the VRS database, whereby organisations who are signed up are notified that a customer is at risk, and promoted to take extra steps to protect you from fraudsters.

More information can be found here about what to do if you think you have fallen victim to a scam, or if you or someone you are caring for is looking to protect themselves from becoming the target of fraud. Registering yourself or someone you care for on to the VRS is Free.

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MPs speak out on financial vulnerability

The VRS welcomes a report published last week by the Treasury Select Committee on their inquiry into consumers’ access to financial services. We were deeply encouraged to see that the Select Committee’s findings align so closely with the aims and motivations of the VRS, with the Select Committee concluding that financial services providers ‘should offer customers the opportunity to exclude themselves either from borrowing altogether or from spending excessive sums of money in short spaces of time’.

During the inquiry they had heard from consumer bodies, charities, financial service providers and statutory bodies. A key part of the report looked into the definition of vulnerability and the duty of care towards them.

Evidence from the Money and Mental Health Policy Institute demonstrated just how crucial a service such as the one the VRS provides is, describing how they have come across people having to put their credit cards in water in the freezer in order to prevent them from using it.

The report calls on UK Finance to work with financial services providers to find ways to increase the variety of self-exclusion spending and lending blocks available to consumers. The VRS will continue to engage with UK Finance, organisations and regulators to support the achievement of this aim.

The report can be read in full here

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VRS wins Credit Information Provider of the Year award

A quote given out during the awards suggests that “Taken forward well, this initiative can become a standard part of data offerings across the credit bureau

The important work that the VRS is doing to protect and support financially vulnerable consumers was recognised last night when it was a winner in the prestigious Credit Awards 2019, in the category of Credit Information Provider of the Year.

The VRS team are delighted to have won the award at this prestigious industry event, particularly when up against some of the most established names in the industry who were on the shortlist.

It is a particular honour to have received this industry endorsement of the work that the VRS are doing to support vulnerable consumers, given that the service has been operational for a relatively short time. It reflects the strength of the proposition, and the consumer need for the service that VRS are providing. Hopefully it can help to increase awareness of the ways in which credit providers can help vulnerable people to take control over their financial situation.

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Mental Health Awareness Week

The Money and Mental Health Policy Institute published research earlier this year showing that those with mental health problems are three times more likely to be in debt. Debt is often a major factor for those suffering with stress and anxiety and the two issues can feed into each other, creating a vicious cycle.

This week, in Mental Health Awareness Week, the VRS wants to highlight the link between mental health and debt and help to break down the stigma that people experiencing such difficulties are facing. It is, in fact, often referred to as a double stigma, in that both are issues that people are reluctant to talk openly about, but which are, frequently, deeply inter-connected.

There are, of course, many factors at play in people’s lives that can contribute to their overall wellbeing, but awareness of the role that financial stability can play is growing. Organisations working with vulnerable people have been drawing attention to the connection between the two problems, with recent Citizens Advice figures showing that 39 per cent of clients with overdraft issues have mental health difficulties, as opposed to 24 per cent of the group’s usual clients.

More action needs to be taken to address this situation, and stronger support in place to ensure that people experiencing mental health difficulties are at least able to feel in control of their finances, so that debt is not able to spiral out of control, impacting their mental wellbeing further.

The VRS has been set up to support vulnerable people who are looking to take control of their financial situation, or to work with organisations who are doing so on behalf of an individual. The VRS allows an individual to join the register for the duration of time in which they are facing a period of vulnerability, however long or short that may be. Crucially it will not have any bearing on future decisions about suitability for credit once removed from the register.

We believe that this helps to remove the stigma connected to mental health and debt, recognising that the statistics show that any one of us could experience financially vulnerability in our lifetime, and that it should not mean that we are judged for it, just supported through it.

If you are struggling to manage your debts, or your finances feel out of control, and this is either impacting, or a result of, your mental wellbeing, the sooner you take action the better. There are lots of excellent mental health and debt charities that you can contact, and the VRS is there to provide a supportive service for you when feeling financially vulnerable.

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How much value do you place on Vulnerability within collections strategy

At this time of year lenders will be gearing up to handle increased levels of borrower contact and the smarter lenders will be preparing for proactive contact. In recent years there have been big advances in the ability to use technology and data to develop pre-impairment indicators that can help identify signs of potential borrower strain before a payment has been missed. There is speech recognition software that can help identify a vulnerable consumer through trigger words and voice tone. All very admirable, and all tools available to help protect a customer from detriment and especially those customers that are vulnerable and should certainly be encouraged.

However, whilst most firms and organisations are trying to improve the situation for vulnerable consumers it is usually after the event of credit or products being provided. My brother Nigel and I have been involved in consumer credit activities for over 35 years and have practical experience in doorstep lending, short term lending, payday lending, debt collecting and our current business as debt purchasers. We have sat on numerous committees and boards of consumer credit trade associations and regularly attend consumer credit roundtables and workshops and it became apparent to us that whilst most firms identify and do their best to deal with vulnerable consumers after the event of credit or services being provided it seemed obvious why was help to identify vulnerable consumers not being done before credit or services are provided? Having looked into the matter further it was simple in that there was nothing to check against, there was no register of vulnerable consumers.

Of course, considering vulnerable consumers circumstances before credit or services are provided is a change to what is currently offered, but sometimes change is for the better. From our many years of working with all types of consumers, it is usually vulnerable consumers that will require additional resource and time spent in providing help and assistance and in many cases, it is abundantly clear that the credit or service provided was not suitable.

In my role as Compliance Directors of SLL Capital Limited, I see the despair of those issued credit when credit was not suitable, and services sold when it is clear the consumer did not require the service. I see cases of those that go on manic spending sprees, gamble with no control and all too often cases of partner fraud and sometimes just poor decision making especially if the consumers native language is not English. In fact, there are so many examples of vulnerability that we always revert to the FCA’s original definition of vulnerability from occasional paper No 8 which defines a vulnerable consumer as: “someone who, due to their personal circumstances, is especially susceptible to detriment, particularly when a firm is not acting with appropriate levels of care”.

You may be wondering if we can see the problem what are we doing about it? My brother and I have got together with a group of five like-minded individuals and formed a company called the Vulnerable Registration Service (VRS). The VRS is the only national register of vulnerable consumers. Our board consists of GDPR experts, Customer relationship management system IT experts, Credit Bureau data experts and business operational experts. The VRS also has an Advisory Board of recognised consumer credit experts that help to guide, innovate and challenge the VRS and feedback recommendations to the VRS Board.

The VRS is funded entirely by the stakeholders who all have a passion to try and improve the situation of vulnerable consumers and who’s mandate is to share a proportion of profit with those charities that help support the VRS and consumer database.

We genuinely hope that the lending community and in fact every organisation and service provider that genuinely wish to raise the game in helping to improve their business service to vulnerable consumers will use the VRS and its database of vulnerable consumers. Getting it right in today’s business place has never been more important. Getting it wrong could mean redress, company embarrassment and the regulator rightly looking at what you do.

Mark Bryant, Director at the Vulnerability Registration Service

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