4 key findings from the FCA's vulnerability review

In this blog, I'll summarise the Financial Conduct Authority (FCA)'s recent survey findings on customer vulnerability in terms of both the progress made and the critical gaps that remain.

How well are financial services firms identifying and supporting vulnerable customers?

Some firms are demonstrating good practices, but generally collections and recoveries processes lag behind in embedding vulnerability best practices. Here are the key findings and our recommendations for improving your operations.

1. Identify earlier and provide tailored support

Some firms excelled in providing tailored, empathetic support (including specialist vulnerability teams, regular check-ins, dedicated case managers, and flexible repayment options). The consumer survey found that, of those who disclosed their vulnerabilities, 57% felt that their provider cared about their circumstances, and 58% said their provider made changes as a result.

However, many collections teams still rely on rigid processes, failing to identify vulnerability early or offer alternative solutions that prevent further financial harm. In fact, only 19% of vulnerable consumers felt their provider even encouraged them to disclose their circumstances in the first place.

My recommendation: Early identification is key. Firms must train collections agents to recognise signs of vulnerability, strengthen affordability assessments and ensure proactive customer engagement.

2. Incorporate into product and service design

Despite over 85% of firms stating that they had taken action to consider the needs of vulnerable customers in product and service design, only 29% had tested the impact and looked at whether the products met their needs.

The survey results demonstrate that vulnerability is not consistently considered in product design, and this extends to the design of collections strategies and forbearance options. Many firms still take a one-size-fits-all approach to arrears management, failing to offer tailored repayment plans or early intervention mechanisms.

My recommendation: Use customer insights to tailor forbearance and debt repayment options that align with their financial circumstances, such as income and expenditure assessments, tailored repayment holidays, or debt restructuring.

3. Monitor long-term outcomes

One of the most significant challenges identified was the lack of effective monitoring of outcomes for vulnerable customers. While some firms have begun using data analytics to detect disparities in collections and recoveries outcomes, many fail to track the long-term impact of their actions on customers' financial health.

My recommendation: Implement enhanced data and analytics to monitor whether vulnerable customers are exiting arrears sustainably, rather than being repeatedly cycled through collections processes. Use cohort analysis to monitor for changes over time.

4. Ensure clear communications

Effective communication is a cornerstone of the FCA's guidelines, yet many customers in arrears report frustration with how they are engaged. The research found that 15% in vulnerable circumstances (rising to 32% for those with a combination of poor health, negative life events and low resilience) had failed to get the information they needed from firms. 16% reported a slow response to enquiries. All of these figures were higher than non-vulnerable consumers.

My recommendation: Implement multi-channel, accessible communication strategies, ensuring letters, emails, SMS, and agent conversations are clear, supportive, and solutions oriented. Test ing customer understanding of communications through user testing, focus groups and A/B testing provides for a data driven approach to continuous improvement.

What does this mean for collections and recoveries teams?

While the FCA's review highlights some positive developments, it also underscores specific challenges within collections and recoveries:

• Collections processes are too rigid - Many firms still prioritise debt recovery over customer welfare, leading to inflexible repayment structures that do not account for vulnerability.
• A cultural shift is needed - Firms must embed vulnerability training and awareness across all roles, at all levels, ensuring that user experience designers, product managers, developers, collections teams, credit risk teams etc are all trained to understand, recognise and design for vulnerability.
• Specialist expertise and technology could be used - Investing in vulnerability specialists, digital affordability tools, and AI-driven customer engagement can transform collections approaches and improve outcomes.
• How should firms embed these findings into their operations?

The FCA's review reinforces the need for firms to balance compliance, customer welfare, and business objectives, ensuring a more ethical and effective approach to debt resolution. Firms should:

• Enhance early identification of vulnerability through data insights and staff training.
• Embed flexible, customer-centric, resolution solutions, ensuring tailored solutions are the norm, not the exception.
• Monitor and evaluate debt resolution outcomes, ensuring the repayment and forbearance solutions that you design and offer customer deliver the expected customer outcomes.
• Create a culture of continuous improvement, staying agile and adaptive in response to evolving customer needs.
• At arum, we advocate for proactive, data-driven, and customer-focused approaches to debt resolution, ensuring that vulnerability is managed ethically and effectively. We are experts in collections and recoveries and are practitioners with decades of experience.