Vulnerable Customers and Later-Life Lending: What the FCA Rules Mean for You

What the FOS data tells us

The Financial Ombudsman Service handles complaints when customers feel a financial firm has not treated them fairly. Approximately 25% of cases involving later-life lending products — including equity release and lifetime mortgages — involve customers who show one or more characteristics of vulnerability. That is a significant proportion, and it signals something important: vulnerability is not rare in this market. It is part of the everyday reality of later-life financial decisions.

This data has driven regulators to sharpen their expectations of firms. If you or someone you care about is thinking about equity release, it is worth understanding what those expectations look like in practice.

The FCA Consumer Duty: firms must deliver good outcomes for everyone

The FCA's Consumer Duty came into force in July 2023. It sets a higher standard of consumer protection across financial services, requiring firms to act to deliver good outcomes for retail customers — not just avoid obvious harms. For vulnerable customers, the obligations are heightened.

Under the Consumer Duty, a firm offering equity release or later-life lending must:

• Understand the needs of vulnerable customers and adapt its service accordingly
• Ensure products and services meet the needs of those customers
• Communicate in a way that is clear, fair, and appropriate to the individual's circumstances
• Provide support that genuinely helps customers — not just a process that ticks boxes

This is FCA-regulated advice in its fullest sense. It is not optional compliance. Firms that fail vulnerable customers face regulatory scrutiny and, in serious cases, enforcement action.

The four drivers of vulnerability

The FCA identifies four categories of factors that could drive vulnerability. Understanding them helps customers and families recognise when additional care is warranted.

• Health: Physical or mental health conditions, including conditions that affect a person's ability to understand or process information — such as early cognitive decline, anxiety, or chronic illness.
• Life events: Significant events that affect financial resilience or decision-making — including bereavement, relationship breakdown, divorce, or becoming a carer for a family member.
• Resilience: Low financial resilience — being close to the edge financially, facing a sudden income shock, or having limited ability to absorb an unexpected cost.
• Capability: Low financial literacy or numeracy, difficulty understanding written documents, or language barriers that affect the ability to engage with complex financial products.

These are not fixed categories. A person can move in and out of vulnerability over time, and one life event can trigger vulnerability across several categories at once.

Vulnerability specific to later-life lending

Later-life lending has its own vulnerability picture. These are some of the situations we see most often:

• Cognitive decline: Older applicants may show early signs of memory impairment or reduced capacity for complex decision-making. This does not automatically mean equity release is inappropriate — but it does mean advisers must take particular care to assess understanding, document capacity, and involve appropriate support where needed.
• Recently bereaved surviving spouse: A widowed homeowner may be approaching equity release shortly after a bereavement, under financial pressure, and without the benefit of a partner who previously helped with financial decisions. This is one of the highest-risk scenarios from a vulnerability perspective.
• Health event prompting urgency: A diagnosis or sudden deterioration in health may create a sense of urgency — a feeling that the decision must be made quickly. Good advice slows this down, not speeds it up, and ensures the urgency is real, not imagined.

The independent safeguard: legal sign-off

Equity Release Council standards require that every customer receives independent legal advice before completing an equity release plan. A solicitor — acting solely for the customer, not the lender — must verify that the customer understands the product, the commitment they are making, and the implications for their estate.

This independent check serves a specific function: it is a structured opportunity, outside the advisory process, for someone to assess the customer's understanding and, where relevant, their capacity. It is one of the most important safeguards in the equity release process, and it applies to every customer, not just those who appear to need it.

What good advice looks like when vulnerability is present

When a customer shows characteristics of vulnerability, an FCA-regulated adviser is expected to:

• Identify and record vulnerability indicators — even where the customer has not self-identified as vulnerable
• Adapt communication — using plain language, avoiding jargon, taking more time, repeating key points as needed
• Document suitability reasoning carefully — showing how the advice was tailored to the individual's circumstances
• Consider whether a trusted third party — a family member, carer, or solicitor — should be involved, with the customer's consent
• Slow the process down if there are signs that urgency is being driven by distress rather than genuine need

None of this is about gatekeeping. Vulnerability is not a barrier to equity release. It is a reason for more care — not less access. The goal is to ensure the customer makes a decision they genuinely understand, at a pace that is right for them.

A note for families

If you are helping a parent or older relative think about equity release, your involvement is welcome. A good adviser will be open to family members being present in conversations, will make time to answer your questions, and will not be put off by the fact that you want to understand what is being recommended. That is exactly as it should be.

If you have concerns about whether a relative has been treated appropriately in a previous equity release conversation, you can raise those directly with the firm involved. If the firm does not respond satisfactorily, the Financial Ombudsman Service is available at no cost to you.