Joint Regulatory Letter on the Cost of Living –
A Call to Act!

Data on Demand Sales Director Simon Gregory highlights his views on the recent published joint letter, setting out shared expectations across regulators on how firms in their respective sectors deal with customers in financial difficulty.

The joint regulatory letter released last week to firms regulated by Ofgem, Ofcom, Ofwat, and the Financial Conduct Authority was the latest in a long line of requests that have been made to firms over the past few years to do more to support their customers. For some I’m sure they are now more than a little numb to words and phrases like “Vulnerability” and “Cost of Living Crisis”. This is understandable, but its also understandable that since we have been having the same conversations with broadly the same asks on firms over the past 2 years that we should start to see more action and less intention.

From a personal perspective we have been closest to the requirements for Financial Services firms set out by the FCA in the Consumer Duty which comes into effect in July 2023 (25 days at the time of writing!). In IDVU we created a service to help businesses better identify customers likely to be in most need of their support. IDVU uses information captured directly from the consumer to identify immediate requirements and also identify change of circumstance associated to the cost of living to quickly help firms engage at the right time and with the right consumers. The data set is transient, but growing and currently includes more than a 100 unique vulnerability variables on over 4 million UK consumers.

Broadly speaking the ask on firms from the various regulators has been clear and hasn’t changed. The latest joint letter calls out 6 key asks:

1. Consider the customer’s situation, recognising that they may have multiple debts and may be dealing with multiple creditors across sectors, and reflect this in the support you offer.

2. Proactively raise awareness of the support available to consumers, and, when customers reach out or indicate they are at risk of falling into financial difficulty, or you otherwise become aware of this, provide support early. This early support can make a big difference to customer outcomes.

3. Make it easy for customers to get the support they need, for example by providing different channels for customers to get in touch, recognising that customers in vulnerable circumstances may have particular needs, and proactively promoting social tariff options where these are available.

4. Tailor support so it is appropriate to the customer’s circumstances (including their ability to pay and whether they are in vulnerable circumstances). Consider using an objective/standardised measure to assess the customer’s financial circumstances to help minimise the burden of them having to provide different information to different firms.

5. Make referrals and provide information at the right time so customers can access advice and support that meets their needs (such as Money Helper and the Government’s Help for Households and websites).

6. Monitor customer outcomes and take action to put things right if they go wrong.

Over the past 24 months we have engaged with 100’s of firms across multiple sectors (most under the jurisdiction of one of the collective regulators referenced here) to deliver free evaluations to help them plan strategy to align with regulatory requirements and more importantly identify and engage with their most vulnerable customers. By design these insights help to satisfy the majority of the 6 objectives outlined above.

In their latest Financial Lives Survey the FCA suggest around 47% of the population, or 25 million UK adults are displaying 1, or more characteristic associated with vulnerability. Our results vary from business to business, sector to sector as you would expect with varying percentages of customer portfolios flagging some form of vulnerability indicator. Across sectors these tend to range from as low as 5% of customers and as high as 70%.

I’m pleased to say we have a growing number of clients actively utilising IDVU to help them better identify, engage and support customers in need of help. What continues to surprise me is the number of businesses who take the “interesting, but not yet” stance, or a “we’re currently focusing on our internal view of the customer”. The reason this surprises me is that stance is directly at odds with the regulatory requirements and also the needs of customers.

Universally regulators are calling for more proactive monitoring. They are asking firms not to rely on their existing data and not to rely on their customer asking them for help. I’m not naïve to everyday business challenges – conflicting priorities, costs, proving ROI, resource constraints, compliance, operationalising new services – all understandable to an extent, but too often in my experience used as an excuse not to act on what is a very simple proposition.

We are not a silver bullet. We don’t believe we are, we have never suggested we are and we never will. Existing, established data providers such as the CRAs and Data Bureaus are doing a great and looking to drive innovation where they can. What we will continue to do is to work in partnership with some of the great business who are trying to help firms and their customers achieve better outcomes.

So in summary – I think its fair to say that from the perspective of the Regulator and Consumer, the time for planning has passed. Now is the time to act!

Simon Gregory, Sales Director – Data on Demand

To find out how Data on Demand can help you identify more vulnerable customers email us at hello@www.dataondemand.co.uk