Consumer Vulnerability - Mainstream, not Marginal

Consumer Vulnerability - Mainstream, not Margina

Tackling Consumer Vulnerability: Regulators' powers, actions and strategies

This report examines how four regulators of essential services are addressing consumer vulnerability, namely, Ofcom, Ofgem, Ofwat and the Financial Conduct Authority (FCA). The aim of this action research was to explore the regulators’ approaches to consumer vulnerability and how these have developed given the different contexts in which they operate, what they are seeking to do and the issues they face, with the aim of learning from their different experiences. The intention was not to seek to rate their performance. Instead the objective was to see what lessons can be shared and policies developed. The statutory frameworks for three of the regulators – Ofcom, Ofgem, and Ofwat – list certain ‘categories’ of consumers for whom they have to have regard, for example, older people and people with disabilities, with the underlying implication that these are vulnerable ‘groups’. Our research shows that these regulators, together with the FCA, are moving away from categorising consumers in this way towards a more rounded understanding of consumer vulnerability. While the regulators have carried out work over the years on issues that affect consumers in vulnerable circumstances, until recently this has been fairly limited and ad hoc but they are now seeking to develop more strategic approaches to consumer vulnerability. Given the different contexts within which they operate, this is happening in different ways and at different stages across the regulators. The first manifestation of a more rounded approach has been Ofgem’s adoption of a detailed consumer vulnerability strategy and accompanying work programme. Ofcom has recently published its approach to participation and consumer vulnerability with a dedicated section of its website. Ofwat and the FCA, by contrast, are at earlier stages in terms of developing an overarching approach to vulnerability issues. Ofwat is considering adopting a consumer vulnerability strategy and is prioritising considerations around affordability, particularly through the current price review process. The FCA, a relatively new organisation with a new remit and responsibilities, has begun developing a vulnerability strategy, and is only beginning to pull all the strands of its work together as an approach to consumers in vulnerable circumstances. During the course of this research all the regulators expressed the desire to share learning and collaborate where possible on this important topic. These developments are very welcome but the critical issue is what happens in practice. The regulators must ensure that: • They make it clear what they have done, what they are doing and what they plan to do to engage and tackle consumer vulnerability. • Tackling consumer vulnerability underpins the work of the whole organisation, including their approaches to competition and economic issues such as cost reflectivity. • Their strategies are backed by clear work programmes and systems to monitor the effects for consumers of their actions and of developments in the market. • They are ready to intervene to use their powers to the maximum to protect consumers in vulnerable circumstances. • They develop close contacts with organisations working with consumers in vulnerable circumstances and involve them in monitoring the effectiveness of their efforts. Although it is challenging, it is vital that the regulators have a firm basis to operationalise their approaches to consumer vulnerability. These findings underline the importance of organisational commitment and backing at senior level combined with effective internal processes. Other crucial ingredients include having a sound evidence base, supported by rounded consumer research to ensure that the regulators stay fully in touch with the factors that place consumers at risk in these essential services. Regulators should set a series of outputs and outcomes to help evaluate the effectiveness of their attempts to tackle consumer vulnerability and regularly report on progress. To this end the regulators should establish a means of ‘external auditing’ to help inform and evaluate their progress. This could be done through development of external ‘challenge groups’, for each regulator or jointly, which involve organisations and experts working with consumers in vulnerable circumstances. This should be underpinned by a clear mechanism so that external input is taken on board and seen to be so. This should not be a one-off exercise but one that becomes an integral part of the regulators’ consumer vulnerability policies and monitoring. So, for example, the challenge groups would have a role in helping to set outputs and outcomes