Firms should share vulnerable consumers’ personal data throughout the distribution chain to help meet their needs and ensure better outcomes, the Financial Conduct Authority (FCA) has said.
Data protection laws, while important, are not a barrier to supporting such consumers, according to a statement issued by the regulator and the Information Commissioner’s Office (ICO).
The FCA requires regulated firms to deliver good outcomes for all consumers, including those who, due to their personal circumstances, are susceptible to harm if a firm does not act responsibly when providing then with products and services.
The joint statement was issued to help firms understand how they should support vulnerable consumers, while meeting their regulatory obligations over the use of customer data.
Full disclosure
One way this data can be used is to help design products that does not cause harm to vulnerable consumers.
Then there is distribution where data can be used to form the communication and support processes needed to manage the needs of such consumers.
Not only does regulation allow organisations to share personal information, Consumer Duty expects providers and intermediaries to pass information to each other to deliver good outcomes for consumers.
But when sharing information, they need to demonstrate that they are complying with data protection requirements.
This means that firms must make sure they have a good reason for collecting the data, which must be accurate, up to date and not be misleading.
They must then show that they are lawfully using this personal data in a way that is fair while being honest about how the information will be used.
The FCA said in the statement that firms need to “use their judgement to apply consumer duty in a proportionate way and determine when it is appropriate to share information” to firms involved in the manufacture, provision, sale and ongoing management of a product or service to a retail customer.
The FCA expects firms to identify and understand the characteristics of vulnerable people and appropriately address their needs.
A big part of this is to establish systems and processes to enable vulnerable consumers to disclose their needs and then to be flexible in their approach to supporting such people.
This will not wash
Andrew Gething, managing director of Morgan Ash, a support services provider to the financial services industry, welcomed the statement.
“The fear of non-compliance with GDPR [General Data Protection Regulation] has stalled progress with consumer duty and its requirements for customer vulnerability management.
“This joint guidance from the FCA and the ICO confirms once again that this will not wash.
“Not only does it allow firms to hold and process vulnerability data in line with data protection laws, but they are actively encouraged to share it within the distribution chain to improve outcomes.”
A question of clarity
The FCA said it will continue to help firms understand what is expected of them from a regulatory perspective, including planned work this year on how consumer duty applies throughout the distribution chain.
The ICO, meanwhile, intends to engage further with stakeholders to identify where clarity may be needed.
This is to ensure that regulatory expectations match how firms are supporting vulnerable consumers.
