Some banks ‘adding to stress’ of bereaved customers, warns regulator

Banks and building societies should do more to support customers affected by bereavement or registering a power of attorney, according to the City regulator.

Since the introduction of the Consumer Duty, some firms are making a difference with clear policies and procedures and actively using data to better identify needs and support their customers, the Financial Conduct Authority (FCA) found.

But the regulator also highlighted areas where some firms need to improve.

Emad Aladhal, director of retail banking at the FCA, said: “Dealing with a bereavement or setting up a power of attorney can often be stressful and emotional.

“When banks and building societies get it right for their customers they can make a real difference at a difficult time. But when they fail to recognise and respond to customers who need more help, it adds to the stress. All firms should consider where they can make improvements.

“Our message to consumers is this – if you need to notify your banking provider about a bereavement or a power of attorney, speak to them about how they can support you and meet your needs.”

A power of attorney is a way of giving a trusted person the legal authority to make decisions on someone else’s behalf, if that person becomes unable to act for themselves.

The potential consequences for customers when firms do not respond adequately can include having their distress compounded by a lack of empathy from staff, getting “lost” in firms’ systems, having to repeat themselves to different staff members, and being unable to access funds quickly enough to pay essential bills.

The regulator said some firms’ staff were unclear on the actions they need to take and how quickly.

Some customers had struggled to get support during an emergency, such as a mental health crisis, adding to their distress.

Some firms also risked leaving themselves open to recurring mistakes due to a lack of training and competency checks.

Greg Sachrajda, head of department in retail banking market interventions at the FCA, told the PA news agency: “We’ve seen banks actively using data to identify the customers who are in vulnerable circumstances and improving their processes as well to meet expectations.

“But, equally, we did find that there were some consumers who weren’t getting the best experience, in particular resulting in them being unable to access funds to be able to pay their essential bills.”

Mr Sachrajda said a key issue for firms to consider is having the flexibility to respond in an emergency situation, when someone’s circumstances may change quickly.

He said: “Firms will have their procedures and staff will follow those, but where you’ve got an emergency situation, for example someone’s capacity may have suddenly changed or funds are urgently needed, it’s making sure that firms can respond appropriately in that situation.”

The FCA saw examples of positive practice where some firms had built in flexibility to ensure that in complex cases, policies and procedures were not a barrier to good customer outcomes.

This included holding forums where complex cases could be escalated, enabling bespoke solutions that may fall outside a rigid interpretation of internal policy.

The regulator wants firms to actively identify information that may indicate customer vulnerability, and, where relevant, seek information from customers that will help them respond to their needs.

It found some firms sought to proactively identify those potentially at risk of being in vulnerable circumstances by using data such as transaction patterns, for example.

Another positive development it highlighted was the use of artificial intelligence (AI), including speech analytics that – either in real-time or through an automatic review after customer contact – could indicate when a customer had said something that may be a sign of vulnerability.

This helped firms ensure appropriate support for the customer, even if their potential vulnerability had not been picked up by the member of staff.

Mr Sachrajda said: “From the FCA’s perspective, we’re really keen on firms using technology in that way to lead to better outcomes for consumers.”

Highlighting another positive, he also said many firms “had dedicated bereavement teams, so you can have (for example) video calls with a specialist adviser or a dedicated phoneline for power of attorney queries”.

However, the FCA also found most firms in the review had a limited range of channels available for attorneys to access the account of the relevant customer. In particular, app-based banking or online banking were often not available for the attorney to use.

It also found other areas where firms need to improve. The FCA found that in some cases, while systems were in place to record customers’ needs, staff failed to check or respond to needs on customer profiles.

Policies and procedures were generally accessible to staff centrally.

But some staff failed to follow firms’ processes, including failing to record customers’ support needs and not prioritising certain types of customers. This could make firms’ policies and procedures ineffective.

In some bereavement and power of attorney cases, staff did not acknowledge that customers were noticeably distressed and upset, which could have an impact on customers’ confidence in dealing with financial services.

The FCA issued guidance to help financial services firms support consumers in vulnerable circumstances in 2021 and introduced the Consumer Duty in 2023, which requires firms to deliver good outcomes for all customers, including those in vulnerable circumstances.

Under the Duty, firms should pay appropriate regard to customer needs and help frontline staff understand how to actively identify information that could indicate vulnerability.

The Duty also sets out that where a person is authorised by a retail customer or by law to help in conducting the customer’s affairs, such as through a power of attorney, the firm must provide the same level of support to that person that they would have provided to the customer.

The FCA has written to all firms in the review, saying “no firm can afford to be complacent”.

Mr Sachrajda said: “All the firms in the review have individual feedback letters and we’ll follow up through supervisory channels to understand what they’ve done.

“But obviously we didn’t include all firms in the review, so for the whole population we will expect them to look at this good and poor practice and think about what they need to do to improve in light of it.”

The regulator also recently published a review into life insurers’ bereavement claim processes. It said some good practices identified in that review could be applied by banks and building societies, such as use of electronic “verification of death”, avoiding the need for claimants to send in death certificates.