"We believe the expected benefits of the guidance are proportionate to the cost to industry, especially when compared against the number of customers potentially affected."
The regulator says its guidance is intended to drive improvements in the treatment of vulnerable consumers and bring about a practical shift in the actions and behaviour of firms that enables this to happen.
In a retrospective impact assessment, the FCA said the guidance applies to 52,000 firms. Costs vary across firms because the guidance applies to firms in different ways depending on its size, the markets it operates in, the products it offers and the characteristics of its target market and its customers.
On a per-firm basis, the average one-off cost ranges from £3,200 for the smallest firms to £3.3 million for the largest firms. The average ongoing cost ranges from £2,400 to £2.4 million per year.
The FCA said compliance costs could include:
• Understanding the needs of customers in vulnerable circumstances e.g. in carrying out or using existing research and data to understand characteristics in their target market/ customer base.
• Training and development: Adapting or development training and opportunity cost of staff time spent on training or sharing knowledge.
• Product and service design: Holding focus groups or exploring resources to understand how products can better meet consumers’ needs, and building this in to the design process.
• Customer service: Adapting processes or systems to allow staff to respond flexibly, or to allow recording or information sharing about customers’ needs.
• Communications: Reviewing language in key documents or tailoring communications.
• Monitoring and evaluation: Obtaining, developing and analysing management information to evaluate whether consumers in vulnerable circumstances are getting outcomes as good as those for other consumers, and making changes where this is not happening. This would also include time spent as part of governance processes.
Based on firms’ responses to a CBA survey about their expenditure, the FCA estimates that the industry had already incurred annual costs of £1.4 billion in approaching treating customers fairly before implementing its new guidance.
In its assessment, the FCA said: "We believe the expected benefits of the guidance are proportionate to the cost to industry, especially when compared against the number of customers potentially affected (our Financial Lives 2020 survey shows that at October 2020, 53% of UK adults had one of more characteristics of vulnerability). Benefits for consumers will include more appropriate consumer transactions, reduction in the probability of individuals experiencing financial loss/ harm, reduced psychological stress and time saved."
