Having taken effect on 31st July 2023, the Consumer Duty requirement to identify and support all customers at risk of vulnerability should now be a key focus for all motor dealers and manufacturers in the UK who offer finance.
As we move through 2025, indications are that we’re going to start to see the regulator move from a carrot to a stick mentality in their response to financial vulnerability. With this in mind, never before has it been more crucial for automotive professionals to ensure that they have the right processes in place to identify and support their vulnerable customers and protect themselves, should the regulator come knocking.
Here are five key questions that automotive professionals must ask themselves right now about their vulnerability processes:
Are you taking a tick-box approach to client vulnerability?
In order to provide the support that all customers deserve, automotive professionals will need to keep in mind that vulnerability is incredibly nuanced and complex. As such, to look for one of a rigid series of potential indicators of vulnerability, or take a tick box approach has never, and will never, work. And it certainly won’t satisfy the regulator who continues to warn against this.
Self-identification is also a no go. Automotive firms may incorrectly believe that customers themselves might share their vulnerabilities. But this is unlikely. After all, it’s entirely possible that the customers themselves might not even be aware they’re at risk from a vulnerability. We should also consider the possibility that those who are aware that they are vulnerable may not want it to be known. There’s still a very real stigma surrounding the prospect of being vulnerable, and a sense of shame that causes people to shy away from discussing it. This means that relying on customers to be open about a potential vulnerability will never work as a means to identify vulnerability.
What is required instead, is a means to systematically identify all signs of vulnerability, based on the FCA’s definitions of vulnerability, for each and every client on an ongoing basis. The best way to do this is by combining clinical expertise with hard data to remove any bias and subjectivity and to collate a robust data set that stands up under regulatory scrutiny.
Do you understand the vulnerability status of each and every customer?
Many automotive firms have been struggling with their vulnerability identification process. This is further complicated when it comes to understanding the difference between customers who may be facing a vulnerable circumstance, and those who are vulnerable and require some degree of support. It’s also critically important to document those who aren’t vulnerable at all, to protect the firm from any future claims.
To give some background on this, we are currently hearing of automotive firms experiencing vulnerability rates of sub 1%. This is much lower than we know to be true. In our experience, the rate of confirmed vulnerability is actually more like 12-15%, with a further 20% who have a vulnerable circumstance, but don’t require any support.
For the vulnerability identification and assessment process to work, it must be done consistently across all customers, and everything should be documented should the regulator come knocking.
Can you produce detailed data and MI on what vulnerabilities are present in your client base?
The regulator expects every firm to have comprehensive data on vulnerability, therefore its essential to have a systematic process for screening all customers, with appropriate accommodations for the needs of those at risk. This is important, not only for the firm’s own records, but to supply to the FCA too.
Often a third-party specialist with a technology-driven assessment tool can help to accelerate this process, removing bias and subjectivity. Not only will this guarantee consistency across the entire customer base, but a technology-driven tool like this will also ensure data can be easily and quickly collated and retrieved.
Are you able to demonstrate how you have supported your vulnerable customers, and indeed, those who are not vulnerable too?
If a vulnerability has been identified, the automotive professional must then ensure that they have supported that customer in the right way to ensure the best outcome. Any vulnerabilities that are identified – as well as any actions or interventions that are taken to provide support – should be comprehensively recorded in a way that can be recovered and acted upon later.
And remember, it’s not just about recording if a customer is vulnerable. In fact, in order to compile the most comprehensive records, firms should also keep thorough records of their customers who they have recorded as not being vulnerable too. Only then can firms ensure they are providing the best possible outcomes for customers, and also helps to protect the automotive firm should any future claims arise, where vulnerability is a factor.
Are you using the term ‘vulnerable’ when speaking to customers?
It’s really important that automotive professionals avoid using the word ‘vulnerable’ when speaking to their customers. Not only does the term have so many negative connotations, but we should be mindful that we are screening against the FCA’s definition of vulnerability which is more than likely to be different from what a customer thinks vulnerability means. Instead, we need to be thinking about duty of care instead. This is about taking a more holistic, person-centred approach to customers.
These five questions are fundamental in how you work with your customers this year – and to ensure you (and your firm) is protected should the regulator come knocking. From larger fines to closer investigations, things are ratcheting up. So don’t delay. Protect yourself now.
Jonathan Barrett is the CEO and co-founder of Comentis
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