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The International Compliance Association (ICA) – part of Wilmington Plc – has welcomed the call from the House of Lords’ Liaison Committee to tackle financial exclusion and further protect vulnerable customers across the UK.
A new report*1 from the House of Lords Liaison Committee has been published calling for the Government to introduce a requirement for the Financial Conduct Authority (FCA) to establish a statutory Duty of Care that banks and other financial services providers must operate towards their customers. It is anticipated this would replace the current ‘Treating Customers Fairly’ regime.
The report estimates that there are 14.2m people in the UK with low financial resilience – characterised by over-indebtedness or with low levels of savings or low or erratic earnings. That figure is up by a third since the start of 2020 following the COVID crisis. According to the FCA this means 27.7 million adults in the UK (more than half of the population) now have characteristics of financial vulnerability.
Jonathan Bowdler, head of postgraduate studies at ICA, stated: “There is an urgent need to protect the growing number of vulnerable customers and people with low financial resilience, including those with low savings, erratic income and debt as this now represents approximately 50% of the population. The Pandemic has further served to highlight the alarming disparity between diverse groups and we believe supporting financial inclusivity and addressing these widespread issues is essential for the wellbeing of our society as a whole.
“The Exclusion Committee’s report is likely to trigger a wide-ranging discussion about the UK’s regulatory approach, particularly if the intention is to replace the Treating Customers Fairly regime as the strategy is suggesting. This will represent a significant development and trigger discussions about the UK’s regulatory approach going forward.
“The ICA works with all of the major financial institutions and, for our members, the potential requirement for the Financial Conduct Authority to establish a statutory Duty of Care will certainly raise questions. Our members will need to understand what the proposed regime will add to the current regulatory framework, which financial providers will be affected, what new controls are likely to be required and also what the impact upon existing safeguards will be.
“On a practical level, we are already seeing firms analysing their own customer databases and reviewing their vulnerable customer and conduct policies in detail. We know from attendees on our professional postgraduate diploma course*2 that there is a good deal of discussion about the systems and controls to have in place. This significant development requires a good deal of thought. Financial institutions will need to ensure training is provided to leaders who influence the culture of the organisation so the focus remains on treating all customers fairly and responsibly.”
For more information about ICA, visit https://www.int-comp.org/ or follow the organisation on Twitter: https://twitter.com/intcompassoc.
Reference: 1 - https://publications.parliament.uk/pa/ld5801/ldselect/ldliaison/267/26702.htm
The new report from the House of Lords Liaison Committee is a follow up the 2017 report of the Financial Exclusion Committee
Reference: 2 - ICA’s Professional Postgraduate Diploma in Governance Risk and Compliance