Huntswood, part of ResultsCX, found the retail lending sector is struggling to support vulnerable customers and more action is needed.
The study showed that over half of UK customers are now considered vulnerable, with numbers rising from 44% in 2023 to 51% in 2024.
Even so, many people did not realise they were vulnerable, with 53% unaware in 2024 compared to 67% in 2023.
Huntswood identified major challenges for lenders.
These included high credit costs making financial hardship worse, aggressive debt collections where customers in arrears were pressured, and mistakes in affordability checks.
Huntswood suggested lenders should tighten affordability checks, offer more flexible forbearance policies, provide payment holidays or lower rates for those in crisis, and work with free debt counselling services like StepChange, but not rely solely on them.
They also advised using data to spot customers at risk of arrears and reaching out early.
Martin Dodd, CEO at Huntswood, said: “Failure to support vulnerable customers presents a very real risk to the lending sector.
“Organisations must act now to ensure they are able to identify their vulnerable customers and deliver appropriate levels of service, not just because it is what the FCA expects, but because it is the right thing to do.
“The good news is that there is an increasing awareness from credit companies of the circumstances that might make an individual vulnerable or require additional support.”
Dodd added: “This increase in awareness is, in part, due to the proactive steps some credit firms are taking to ask customers about their needs and prompt self-declarations.”
Siddharth Parashar, managing director, UK and Europe at ResultsCX, said: “Vulnerable customers often feel a more significant impact from a poor product or experience, so its important credit firms get the basics right to reduce this, particularly in light of the FCA’s renewed focus in this area.
“Those firms that are achieving excellent outcomes are vulnerability-aware and have a core service that is flexible and can provide support when needed.
“They can detect risks effectively, and, most importantly, have clear strategies that are built around the need for flexibility rather than trying to account for every potential customer circumstance, and can be easily enacted to mitigate those risks and continually improve and evolve.”
