Support services provider MorganAsh has warned of the rising risk of AI-enabled customer vulnerability fraud, calling on firms to strengthen processes and move beyond reactive approaches to identifying and managing customer vulnerability.
MorganAsh has seen increasing reports from firms in the credit sector of customers using AI-generated claims of customer vulnerability to avoid or delay debt repayment. Firms are reporting a rise in highly structured, templated and legally articulate correspondence, complete with references to the FCA’s legislation, which has all of the tell-tale signs of being generated by AI.
MorganAsh argues that without robust evidence of a prior vulnerability assessment, it is difficult for firms to dismiss any fraudulent cases.
The support services provider warns that the trend is likely to spread across wider financial services as awareness of Consumer Duty and customer vulnerability regulation increases. With growing access to generative AI tools making these types of claims far easier, MorganAsh has once again backed the FCA’s recent call for firms to adopt proactive measures to identify and manage customer vulnerability.
The call for proactive measures is in response to the fact that many firms still only identify vulnerable customers in single-digit percentages – far short of the near 50% figure established by the FCA as part of its Financial Lives survey. While the regulator has warned that a reactive approach increases the risk of poor outcomes for consumers, MorganAsh believes that it also risks leaving firms exposed to fraud through under-detection.
Concerns have also been raised around firms only recording customers’ vulnerabilities when an issue is deemed to be sufficiently serious. With the FCA’s definition of customer vulnerability designed to be deliberately broad to encompass mild and temporary circumstances, MorganAsh argues that firms with no evidence of earlier assessment face a significant disadvantage.
They say that firms relying on passive data sources, such as credit and financial data, or reactive tools such as call centre voice analytics, are particularly at risk. These approaches tend to identify vulnerability only at the point of crisis, rather than a longitudinal record that evidences proactive engagement.
Andrew Gething, managing director of MorganAsh, said: "It is unfortunate to hear of an increase in potentially inaccurate claims of vulnerability, although we can understand the acceleration due to AI. While we mustn’t rule out those using AI to assist with communication or overcome barriers to engagement, we have to be vigilant of vexatious claims.
"Firms that have adopted a proactive approach to customer vulnerability management are well-positioned to rebuke fraudulent or inaccurate claims. By engaging with customers proactively and recording assessments at the earliest opportunity, firms hold clear evidence of what was disclosed and robust records of characteristics which can be provided as evidence in the event of any future claim.
"The bar for defending these types of claims is much higher than required for Consumer Duty reporting, which means firms need robust systems and frameworks in place. That is ultimately where technology and digital customer vulnerability management continue to deliver real advantages. Adopting a digital approach means firms can strengthen evidence frameworks without distracting from the priority of identifying and genuinely supporting those customers who are truly vulnerable and ensuring they receive the right outcomes."
