The Central Bank of Ireland’s revised Consumer Protection Code (the “Code”) aims to protect vulnerable consumers when they deal with financial service providers. Financial service providers must provide reasonable arrangements and/or assistance that may be necessary when they are dealing with a vulnerable consumer. Nobody could reasonably object to this provision. From the perspective of the financial service provider, however, there may be practical difficulties in complying with their obligations in every instance. Processes will need to be put in place to ensure that every employee is clear on how to identify a vulnerable consumer. Having done this, it will need to be clear what arrangements and/or assistance should be provided to that consumer. The first step in this process is to ensure that all employees are clear on who might be a vulnerable consumer.
What is a Vulnerable Consumer?
The Code makes it clear the financial service providers’ obligations extend beyond explaining products to vulnerable consumers. That obligation does exist but financial service providers have a heightened obligation to vulnerable consumers. This heightened obligation is to assist (a) consumers who have limited capacity to make decisions and (b) those that, while they are perfectly capable of making a decision, cannot use standard documentation due to a particular physical impediment. In a nutshell, financial service providers need to be able to show that every consumer understood what they bought.
The concept of a vulnerable consumer is something that will develop over time. At this early stage there is increased scope for disagreement on which consumers need assistance and what level of assistance they need. In coming to a decision on how to address these issues, companies may be able to draw some inspiration from a comprehensive report that the Law Reform Commission produced on the issue in 2006. While the report is quite lengthy, there are certain aspects of it that would be useful to focus on. For example, the Irish law on what amounts to ‘limited capacity’ is outlined. Similarly, challenges people with physical impairments face were looked at in the Report.
The Law Reform Commission’s report was preceded by a consultation paper in 2003. This paper specifically considered the issue of when the elderly need to be protected from financial abuse. The findings from that consultation paper inform the findings in the 2006 report but the detailed work contained in the 2003 consultation paper merits attention in its own right.
There is also a body of law that seeks to prevent discrimination that needs to be considered. While a cynical view might lead one to the conclusion that not contracting with vulnerable consumers is the safest route, this is very unlikely to be the case. While that approach may avoid the Code that code does not operate in a vacuum and the consequences of breaching some of the other relevant laws may be even more serious.
The Reports’ Recommendations
The Law Reform Commission’s research will help companies to understand the issues facing the vulnerable. It is the recommendations that were made in the report, however, that may be most instructive on what ‘best practice’ might be. While the recommendations are aimed at how the law on the area needs to change, many of the principles can be applied in the context of the Code.
For example, the Law Reform Commission advocates finding positive solutions. What is meant by this is that the focus should be on what is necessary to enable vulnerable people rather than focussing on what makes them vulnerable. The Report also recommends that a common-sense approach, as opposed to a prescriptive test, be applied when trying to ascertain a person’s capacity. In the context of a financial service provider this means educating employees on the issues so that you can trust them to use their common sense to address these sensitive issues appropriately.
What are the Main Points?
When a company tries to protect vulnerable consumers some judgement calls will have to be made. For example, simply treating everybody over a certain age or with a physical impairment as a vulnerable consumer is neither responsible nor appropriate. Understanding the issues will allow processes to better reflect the ultimate objective. Some of the concepts are quite complex but there are sources of information that can help. One of these sources, but by no means the only one, is the Law Reform Commission’s website.
The need to tackle this issue raises an opportunity. One of the most cited problems with financial services is that the industry has lost the trust of the consumer. Proactively taking steps to help vulnerable consumer can represent one way of rebuilding that trust. If this step is taken in a positive and thoughtful way then it will be noticed and appreciated.
Contributed by Grant Murtagh and Eoin Caulfield.
