Financial services firms face a growing risk from AI-generated customer vulnerability claims being used to avoid or delay debt repayments, according to MorganAsh.
The support services provider said it had seen increasing reports from firms in the credit sector of customers submitting highly structured and legally framed vulnerability claims, including references to FCA rules, which appear to have been generated by artificial intelligence.
MorganAsh warned that firms without robust evidence of earlier vulnerability assessments may find it difficult to challenge claims they believe are fraudulent or inaccurate.
The company said the issue was likely to spread across wider financial services as awareness of Consumer Duty and customer vulnerability regulation increases, while access to generative AI tools makes it easier for customers to produce formal correspondence.
MorganAsh said the trend underlined the need for firms to move beyond reactive approaches to identifying and managing customer vulnerability.
It said many firms still identify vulnerable customers in single-digit percentages, well below the near 50% figure identified by the FCA through its Financial Lives survey.
The regulator has warned that reactive approaches can increase the risk of poor consumer outcomes. MorganAsh said under-detection could also leave firms more exposed to fraud.
The company also raised concerns that some firms only record vulnerabilities when an issue is judged to be sufficiently serious, despite the FCA’s broad definition of customer vulnerability, which includes mild and temporary circumstances.
It said firms relying on passive data sources, such as credit and financial data, or reactive tools such as call centre voice analytics, were particularly exposed because these approaches tend to identify vulnerability only at the point of crisis.
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 continues 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.”
MorganAsh specialises in Consumer Duty and customer vulnerability. Its MorganAsh Resilience System, known as MARS, is used across financial services and the utilities sector to identify vulnerable characteristics and produce an objective Resilience Rating.
