Research and analysis

Vulnerable consumers: challenges and solutions (Edinburgh)

Updated 13 November 2018

On 26 September 2018, the Competition and Markets Authority (CMA) hosted a roundtable discussion in Edinburgh on vulnerable consumers.

The roundtable focused on the challenges experienced by vulnerable consumers in Scotland and the potential solutions to these challenges.

Representatives of the Scottish government, Citizens Advice Scotland, Carnegie UK Trust, Money Advice Scotland, Scottish Water, Energy Action Scotland, Trading Standards Scotland, Consumer Insight Centre and the Consumer Forum/Water Industry Commission for Scotland attended the roundtable. The discussion was held under Chatham House rules.

The remainder of this summary covers the main points raised during the roundtable.

Understanding the challenges

Attendees raised the following issues when discussing the challenges facing vulnerable consumers.

• The importance of defining consumer vulnerability broadly. This included recognising that all consumers could be vulnerable in certain situations, such as digital markets, and that vulnerability can be a transient state. Power cuts could be one factor that gives rise to situational/market specific vulnerability which affects many consumers.
• The challenges facing consumers living in rural areas of Scotland. This could result in a limited choice of services and suppliers across different markets. There might be particular issues in relation to heating oil, care services and legal services. There may be limited access to Broadband in some areas.
• Vulnerable consumers may struggle to understand communications from suppliers, particularly bills. Sometimes vulnerable consumers might not open their post and check their bills.
• Vulnerable consumers might struggle when they want to terminate contracts. They might be sold ‘extras’ by suppliers that they do not want or use e.g. in relation to multi-media packages. Consumers can need specialist knowledge to stop contracts e.g. they have to learn particular words to use when talking to suppliers about cancellation of contracts. They may also need confidence to interact with suppliers which vulnerable consumers might not have.
• When thinking about consumer vulnerability, it is important to focus on the outcomes desired and have more cross-sector working and integration. Many vulnerable consumers are unaware of the support available for them.
• It can be difficult to identify vulnerable consumers. Fewer people in Scotland may register as vulnerable consumers than elsewhere in the UK, being less likely to be on priority services registers.
• A lack of digital skills and limited online access are key issues. Generally there is a perception that everyone is online but some consumers may not have internet access or, if they do have access, e.g. through mobile phones, they may not want to make purchases online. Sometimes consumers may struggle with lots of information and cannot easily use their smart phones to make price comparisons.
• Some consumers may not trust digital markets. Some people, including young people, may prefer to interact with suppliers face to face. However, it may be harder to have face to face interactions in some markets e.g. in retail banking with the closure of bank branches. Some consumers may also be concerned about the growth in cashless payment and the decline in opportunities to pay by cash.
• Vulnerable consumers can be overwhelmed with information. Some may just want to be told what to buy in certain markets. It can be difficult to give some vulnerable consumers advice, especially those with financial difficulties, because there are regulations that restrict access and product recommendation but they should receive support.
• In relation to the ‘loyalty penalty’, long-standing customers, often on rollover contracts or default tariffs, often pay more than new customers. Consumers in Scotland may be particularly attracted to brand names that include ‘Scottish’ or ‘Scotland’.
• Some consumers may not know they can switch supplier to find a better deal. Some consumers may think it is strange that they have to switch in order to get the best deal. While there are apps that can help consumers to switch, people may not want to share their data.
• Vulnerable consumers’ interests may not be represented at board level in companies. Consumer challenge panels can help to represent these consumers’ views to company boards and can also challenge company decisions that may harm vulnerable consumers.
• Energy efficiency measures and mobility aids are two markets where consumers may be particularly vulnerable.
• Some of the challenges facing vulnerable consumers in dealing with suppliers may also apply to small businesses.

Addressing the challenges

Attendees raised the following issues when discussing potential solutions to address the challenges facing vulnerable consumers.

• Price caps may have a role in some instances to help vulnerable consumers but only as transitional solution. If a price cap is in place, consumers may think they are protected and are even less likely to switch supplier. Price caps could also result in some suppliers withdrawing from markets which may be harmful for their consumers.
• More regulation, including price control, may be needed in some markets e.g. for banking services. The prices of core services should be regulated and consumers could then pay different prices for extras.
• It is important that suppliers hear from consumers. Some, such as energy suppliers, have set up consumer panels but sometimes it can be difficult to get consumer involvement in technically complex markets.
• The most effective behavioural ‘nudges’ are those where consumers do not have to ‘opt-in’ but can ‘opt-out’.
• There is a role for third party intermediaries (TPIs) in supporting vulnerable consumers but some consumers may be concerned about giving up their data. They may be more willing to give up their data if public bodies are the TPIs.
• Suppliers may want to support their vulnerable consumers but do not always know who they are. There is scope for greater sharing of data on vulnerable consumers across suppliers in different sectors to help improve support for them. There is a need for a shared priority services register in Scotland although some consumers may not be vulnerable in every market. There are also questions about who should be the master controller of such a register.
• It may be useful to think about solutions for vulnerable consumers in the future as well as consumers who are currently vulnerable. Consumer education for younger people could help make them more savvy in relation to switching supplier, data sharing to get the best deals etc.
• It is important that regulators engage with vulnerable consumers to understand their challenges. Some regulators have more advanced consumer engagement than others and have realised more improvements in their sectors. Regulators could learn from each other on how best to support vulnerable consumers.
• Community based collective purchasing schemes may work well. There are good examples of successful collective purchases by house associations on behalf of their residents.
• Sometimes collective purchasing is very dependent on individuals who organise it. Sometimes vulnerable consumers may not be very engaged in any such collective initiatives.
• Community resilience and community support for vulnerable consumers could be widened. Currently there may be such support for vulnerable consumers during bad weather in respect of their energy or water supplies. This could be extended to cover other services such as access to digital services. Many communities may be concerned about the loss of Broadband connections.
• Suppliers should consider adopting consumer principles to help ensure vulnerable consumers are supported. Some consumer principles have been developed for some markets e.g. legal services.