Warning:10 is the average for children to start buying on-line

According to research conducted by the charity Pfeg, the personal finance education group, 10 is the average age that children start to purchase items on line. It is therefore just as well that financial education starts to be embedded into the maths and citizenship curriculum at schools this month in an attempt to help people manage their money better.

However, Business also has a responsibility in ensuring there is no exploitation of vulnerable customers such as children when it comes to money management.  And if they don’t there may be a big price to pay for their unethical behaviours as we have seen recently when Google agreed to refund c$19 million dollars to parents whose children ran up enormous bills by downloading apps from its Play store without their parent’s authorisation (an amount imposed by the US Federal Trade Commission).  Some of the children who downloaded apps went on to incur large bills through in -app purchases.  

Google is accused of allowing the purchase of items without a password and of not displaying information about charges. It has agreed to change its billing procedure so that it obtains the consent of the consumer before charging.  This is another example of poor behaviour damaging reputation and the need to engender a culture of fair treatment and transparency of operation to build trust.  Hopefully the new curriculum, which includes learning through financial games, will help to engender more savvy teenagers and adults, equipping them to deal more effectively with the increasing complexities of technology where privacy, implicit consent and big data are now fundamental parts of the digital game.

FCA bites into payday lender Wonga

Wonga has been accused of bullying tens of thousands of vulnerable customers by sending fake letters purporting to be from legal and debt collection firms. Their target market is essentially vulnerable customers so it's good that the new payday regulator the FCA is taking things seriously. There is a fine line between poor ethical behaviour and illegal practices and as this is being referred to the police it looks like they're not going to get away with it on a number of accounts - which is good news for their poor (literally) customers.

It costs not to take customers complaints seriously

Over the weekend it was announced that the FCA had fined HomeServe £ 30.6m for mis-selling insurance policies and mishandling customer complaints. The pay to sales teams was structured in a way that gave staff incentives to increase the volume of products sold, irrespective of of customers' need for the products. Many of the customers were vulnerable older people.

The pay structure also meant that people handling complaints were paid according to how many they closed, regardless of the outcome for the customer. As usual with these cases, the Board and senior management were also found wanting IE not "sufficiently engaged" with compliance matters.

At one time there used to be a marketing mantra which was treat " a customer complaining as a loyal customer giving you a second chance" and with this kind of ethos a complaining customer provides the company with opportunities to turn the transactions round and build relationships and loyalty (i.e in the main all people need is to be listened to and taken seriously).

Which? also reported that the big six energy companies had problems with complaints as they received 5.5m complaints in a year. There may not be any genuine loyalty with utility companies but it is clear that by not investigating complaints early enough (root cause analysis, feedback, action) they have engendered contempt for customers rather than creating opportunities to prove they really care. Thankfully this kind of behaviour is no longer tolerated by any of the regulators.

When is transparency not enough: with vulnerable customers

The consumer group Which? has been drawing attention recently to payday lenders and what it sees as exploitation of borrowers due to their excessive fees for non-payment which can push them further into debt. One of the big payday lenders, Wonga, stated in the media yesterday that they are "completely transparent about fees" as though this is sufficient in getting them off the hook for any responsibility to their customers.

Some may say that if an individual gets into debt it is their own fault, and many in business seem to think this way. However, in the House of Lords yesterday a question was raised about why the Government is not doing more to hold banks to account for the PPI scandal. While billions have already been paid out to customers in recompense there was a view that many more customers may have suffered losses and not claimed. One Lord stated that it was in fact vulnerable customers that were less likely to claim.

In April this year the FCA will be taking over the regulation of payday lenders. It seems very likely therefore that we are going to hear about mis-selling, poor customer treatment and unethical behaviour similar to PPI and the banks in the payday lending arena (bearing in mind the OFT are already investigating a 7th payday lender following its market study in 2013).

The whole question of marketing to "vulnerable customers" is a tricky subject. Some easier classifications of "vulnerable"are children, the elderly, the mentally impaired.The FCA has emphasised the importance of Treating Customers Fairly and their 6th customer "outcome"states that " products and services marketed and sold in the retail market are designed to meet the needs of identified consumer groups and targeted accordingly".  Hopefully the payday lenders are now creating genuine "vulnerable customer" strategies explaining their approach to transparency in anticipation of  FCA challenge.