Introduction: The Importance of Fair Treatment of Vulnerable Customers in Financial Services
Financial services firms are under growing regulatory pressure to protect vulnerable customers and ensure they are treated fairly throughout the customer journey. The UK’s Financial Conduct Authority (FCA) has made it clear that poor treatment of customers in financial difficulty can result in significant fines, mandatory redress, and long-term reputational damage. The fair treatment of vulnerable customers in financial services is no longer optional—it’s an ethical and regulatory imperative.
This blog explores recent FCA enforcement actions, the dangers of failing to support vulnerable customers, and best practices to ensure compliance and, more importantly, fair outcomes.
The Consequences of Failing Vulnerable Customers
Several high-profile cases demonstrate the severe consequences of not treating vulnerable customers fairly:
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TSB Bank plc was fined £10.9 million in October 2024 after failing to fairly treat over 232,000 customers in financial difficulty. The bank issued unrealistic repayment plans and inappropriate fees, leading to £99.9 million in redress.
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Volkswagen Financial Services (UK) Limited received a £5.4 million fine for failing to offer tailored support to customers in arrears. The firm repossessed vehicles without considering alternative solutions, affecting over 110,000 customers and agreeing to pay £21.5 million in redress.
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HSBC Bank plc was fined £6.2 million in May 2024 for lacking appropriate systems and training to deal with customers facing financial difficulty.
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BrightHouse (Caversham Finance Limited) paid £14.8 million in redress for irresponsible lending, affecting nearly a quarter million customers.
These FCA enforcement actions highlight the risks of non-compliance with vulnerable customer treatment guidelines, including financial penalties, operational disruption, and public backlash. You can read more about the FCA’s expectations on their official guidance for firms.
What the FCA Expects from Financial Services Firms
To stay compliant and deliver fair outcomes, firms must align with the FCA’s guidance on the fair treatment of vulnerable customers in financial services. This includes:
Identifying Vulnerability Proactively
Use data and behavioural indicators to identify customers who may be in vulnerable situations, such as those affected by illness, financial loss, or major life events.
Training Staff to Handle Vulnerability with Empathy
Frontline staff should receive scenario-based training to handle complaints, disputes, and conversations with sensitivity and care. (See our post on building empathy in complaint handling).
Monitoring Outcomes
Track and evaluate how vulnerable customers are being supported. Ensure feedback loops exist to improve processes continuously.
Designing Accessible Products and Services
Simplify communication, offer flexible repayment terms, and ensure that complaint procedures are easy to understand and use.
Best Practices for Treating Vulnerable Customers in Financial Services
To meet both regulatory requirements and customer expectations, adopt these best practices:
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Use Clear, Human-Centric Communication
Avoid jargon and adapt communication styles for customers with different needs. -
Offer Realistic and Flexible Repayment Plans
Take the customer’s financial situation into account before setting repayment expectations. -
Implement Robust Complaint Management Systems
Ensure all complaints—especially those involving vulnerable customers—are tracked, escalated, and resolved fairly. -
Regularly Audit and Improve
Use audits, customer feedback, and internal reviews to strengthen vulnerability policies.
How Forseti Helps Financial Firms Stay Compliant and Customer-Focused
Forseti offers a comprehensive complaint management platform designed to help firms:
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Track and resolve cases automatically
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Identify vulnerability trends and red flags early
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Ensure a fair and auditable resolution process
With Forseti, financial services firms can protect vulnerable customers while maintaining FCA compliance—and building long-term customer trust. Learn more about Forseti’s platform.
Conclusion: Vulnerable Customer Compliance Isn’t Optional
Failing to support vulnerable customers can have devastating consequences for both the individual and the institution. The FCA’s enforcement actions against TSB, Volkswagen Finance, HSBC, and BrightHouse serve as powerful reminders of what’s at stake.
Firms must go beyond checkbox compliance and use systems that reflect genuine care, accountability, and fairness. With solutions like Forseti, businesses can turn vulnerability into an opportunity to lead with purpose and avoid costly mistakes.