The Financial Sector Conduct Authority (FSCA) published its Statement on Consumer Vulnerability (Vulnerability Statement) on 19 March 2024. The FSCA is responsible for protecting financial customers by promoting and encouraging fair treatment by financial institutions and the promotion of financial inclusion.
The Vulnerability Statement therefore supports the FSCA objectives and aims to stimulate thinking and actions in the financial sector to identify and address the needs of vulnerable consumers. This is aligned with treating customers fairly (TCF).
According to the publication, there are different jurisdictions (other than the South African framework) that define customer vulnerability. The definitions generally consider the following three elements:
- Individual characteristics – such as age, sex, disability, ethnicity, socio-economic status, etc.
- Individual circumstances – including changes in family structures, grief, divorce, loss of job, etc. and
- External conditions – including distribution of resources, inequality, discrimination, lack of access to services such as health care, retail services, education, or affordable housing.
The report considers international practices and provides information on the approach of the Financial Conduct Authority (United Kingdom), the Financial Markets Authority (New Zealand), the European Union (EU) and the Central Bank of Ireland.
In considering the development of a Consumer Vulnerability Framework in South Africa, the FSCA may adopt a similar approach and consider vulnerability in terms of the following three dimensions:
- Demographics
- Resilience, and
- Life circumstances
As vulnerable consumers lack the financial skills and knowledge required to make informed decisions about financial products and services, the FSCA as part of its mandate of promoting financial education, will develop financial education programs that empower vulnerable customers with the knowledge to help them understand key financial concepts and develop the skills needed to manage their finances effectively. There are key considerations for these programmes are:
- Understanding the needs of vulnerable customers
- Collaboration
- Monitoring and evaluation
Financial institutions will be required to implement measures to better protect and support vulnerable consumers by including consumer vulnerability in their processes, policies, and procedures.
Based on the information made available, the FSCA considerations for a vulnerability framework will have a phased approach. The FSCA will ensure ongoing consumer education during all 3 phases.
- Phase 1 (2024 – 2025): Sectoral and consumer consultations based on paper and inciting focus on vulnerability as part of delivering TCF outcomes will be focus areas.
- Phase 2 (2025 – 2027): Analysis of feedback from Phase 1, consider further research in support and embedding approaches to vulnerability in supervisory practices.
- Phase 3 (2027 – 2028): A review will be conducted.