The Financial Conduct Authority (FCA) has set out new best practice guidance for firms to do more to protect vulnerable consumers in its latest consultation paper.

The regulator said that more than 24 million people display one or more potential characteristics of vulnerability – which include physical and mental health issues, recent life events such as bereavement, capability and financial resilience.

The consultation incorporates feedback from a range of bodies including consumer organisations, firms and trade bodies following the first phase of consultation in July 2019.

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The FCA said it had found many examples of good practice and firms thinking carefully about their customers and potential vulnerability.

However, the FCA is also aware of cases where vulnerability is either not considered by firms or positively exploited for gain.

The guidance aims to provide a framework that allows all firms to accurately assess whether they are treating vulnerable consumers fairly, ensuring consistency across the financial services sector.

Christopher Woolard, interim chief executive at the FCA, said: “Today’s guidance sets out what firms should do to ensure vulnerable consumers are being treated fairly.

“We know many more customers will be struggling with their finances as a result of the impact of coronavirus. Supporting vulnerable consumers is a key focus for the FCA, and the coronavirus crisis has only highlighted its importance.

“While many firms do excellent work to support their vulnerable customers, we will not hesitate to step in where others do not.”

Stephen Lowe, group communications director at Just Group, said: “We are pleased to see the regulator is pushing on with its vulnerability agenda and providing more detail about how it expects firms to meet their obligations.

“The coronavirus pandemic has brought many of the vulnerability issues the FCA is trying to tackle into sharp focus – health problems, bereavement, job loss, financial stress – and is a reminder how quickly people’s circumstances can change due to events outside their control.

“We know that most firms have embraced the vulnerability issue and are taking steps in the right direction, but some are more advanced than others. Our own research last year found 94% of firms said they were treating the issue seriously.

“Embedding vulnerability is a challenge so the additional guidance and clarity provided by this latest consultation will be widely welcomed.”

Whilst Eric Leenders, managing director of personal finance at UK Finance said the trade body was looking forward to working with the regulator to build the finalised guidance.

He said: “This draft guidance will provide a practical framework to help identify vulnerable customers and ensure they receive the best possible support.

“The banking and finance industry has put in place a clear plan to help customers whose finances have been impacted by coronavirus, in particular those in vulnerable circumstances. This includes payment deferrals on mortgages and consumer credit products, providing support through dedicated telephone helplines and helping those shielding to access cash and pay in a way that suits them.

“The industry’s response to this pandemic has already been shaped by the FCA’s initial consultation on vulnerable customers and we look forward to working with the regulator to build on this as the guidance is finalised.”

The guidance is open for consultation until 30 September 2020.