The FCA has placed a duty of care on financial institutions to protect vulnerable customers. But it’s not enough. The whole landscape needs to be re-imagined, Fair4All Finance tells Quids in! Pro

The UK’s growing financial inequality demands urgent attention from policymakers and practitioners alike. Vulnerable consumers, already at a disadvantage, face significant barriers in accessing and navigating financial services. As poverty rates climb and cost-of-living challenges persist for those struggling most, the need for systemic reform is as pressing as ever. Kate Pender, CEO of Fair4All Finance, offers insight into the challenges and solutions for fostering financial inclusion and protecting those most at risk.

Fair4All Finance was established to tackle the financial exclusion experienced by millions in the UK. The organisation works to improve access to fair and affordable financial products, such as loans and credit, while addressing the “poverty premium” – the extra costs incurred by low-income households for essential services. 

“In the UK, 20.3 million people are now living in financially vulnerable circumstances, up 16% since 2022,” Pender explains. “This rise reflects the devastating impact of the cost-of-living crisis. Many are forced to borrow money just to cover basic needs, creating a cycle of debt that is hard to escape.” 

Fair4All Finance supports community-based lenders like credit unions and Community Development Finance Institutions (CDFIs), which prioritise customer welfare over profit. “These organisations are rooted in their communities and trusted to help people manage their money effectively,” says Pender. 

Beyond Compliance

Financial institutions have a legal duty to serve their customers responsibly, but vulnerable consumers often require more than what regulation mandates. Pender stresses that institutions must adopt a genuine duty of care, one that includes empathy, understanding, and proactive support. 

“Good practice means ensuring that everyone knows support is available,” she notes. “This can include low-cost products, benefits calculators, and grants. Many people are unaware they are eligible for significant financial assistance. Our research shows they could receive an average of £450 per month in unclaimed benefits.” 

Institutions can also simplify their products and provide clear, jargon-free guidance to help consumers make informed decisions. Practical tools, such as budgeting calculators and scenario-based advice, can further empower individuals to navigate their financial challenges with confidence. 

Accessing Financial Education

The availability of online resources like MoneySavingExpert.com is a positive step, but they can remain inaccessible to many low-income consumers. Issues such as digital exclusion, limited literacy, and language barriers prevent vulnerable groups from benefiting fully. 

“Ensuring consumers have clear, practical, and thorough information is critical,” Pender says. “Financial services must simplify their communication and offer support through a range of channels – online, in-person, and over the phone – to cater to different needs.” 

Partnerships with community organisations are also vital. “Embedding financial guidance in trusted spaces, like food banks or community centres, can help reach people who might not otherwise seek advice,” she suggests. 

Fair4All Finance has also emphasised the importance of timing. “We’ve seen that people in financial crisis are often not ready to engage with advice immediately,” Pender explains. “Support must be ongoing, with opportunities to revisit guidance when the individual feels ready.”

Rights to Reply

The Financial Conduct Authority (FCA) has introduced a consumer duty requiring financial institutions to provide accessible feedback and complaints mechanisms. However, vulnerable consumers often hesitate to advocate for themselves, fearing judgement or dismissal. 

“Clear channels for two-way communication are essential,” Pender stresses. “Providers must create accessible feedback systems, such as helplines with translation services or video consultations for sign language users. Monthly surveys can also help providers stay attuned to their communities’ needs.” 

Rethinking ‘Affordable’

The perception that community-based lenders offer uncompetitive interest rates oversimplifies the concept of affordable lending. “Affordable lending means providing loans with terms that borrowers can manage without causing financial harm,” Pender explains. 

Credit unions and CDFIs prioritise flexibility and understanding over profit, assessing a borrower’s overall circumstances rather than focusing solely on credit scores. “These organisations see customers as more than just numbers,” she says. “Their holistic approach helps avoid the traps of high-interest, predatory lending.” 

Defusing the Poverty Premium Timebomb

The financial industry often justifies high costs for low-income customers as a risk premium, but this perpetuates cycles of poverty. Pender calls for systemic changes to break this pattern. 

“Fair4All Finance has shown that offering fair and affordable credit backed by guarantees can help lenders test new models,” she notes. “In many cases, customers who were initially deemed high-risk repaid their loans successfully and went on to access standard financial products.” 

To combat the poverty premium, financial institutions must examine and address bias within their decision-making models. “Research has shown that some ethnic minority groups inexplicably face higher costs,” Pender points out. “Providers must scrutinise their algorithms to ensure fairness.” 

Financial Services as a Utility?

As financial institutions debate their responsibility to serve low-income customers, Pender underscores the importance of regulation. “Everyone needs access to fair financial products – basic bank accounts are a good example of what regulation can achieve,” she says. 

International models, such as the US Community Reinvestment Act, demonstrate how regulation can drive financial inclusion. “We need a similar approach in the UK to ensure financial institutions prioritise consumer welfare,” Pender argues.  

Building financial resilience requires addressing the broader social determinants of economic disadvantage. Linking financial services to health, education, and housing initiatives can help create more equitable communities. 

Call to Action

Pender wants to see a national financial inclusion strategy. “This must involve collaboration across industries, government, and civil society,” she says. “Access to fair financial products can transform lives, enabling individuals to overcome crises and participate fully in society.” 

As the cost-of-living crisis continues to strain low-income households across the UK, the need for systemic reform is clear. Financial institutions, regulators, and policymakers must work together to ensure that vulnerable consumers are not left behind. 

“The financial services industry has the power to make a significant difference,” Pender concludes. “By fostering inclusion and equity, we can create a society where everyone has the tools to build a stable and secure future.” 

Image: Wavebreakmedia / Shutterstock