13 Mar 2019
Carphone Warehouse fined for mis-selling insurance
Carphone Warehouse has been fined more than £29 million by the Financial Conduct Authority (FCA), for mis-selling insurance.
The UK’s financial regulator stated that the firm failed to train their staff on how to properly advise customers buying their ‘Geek Squad’ mobile phone insurance, after being tipped off by a whistle blower.
Executive director of enforcement and market oversight at the FCA, Mark Steward, said:
“The Carphone Warehouse and its staff persuaded customers to purchase the Geek Squad product which in some cases had little to no value because the customer already had insurance cover. The high level of cancellations should have been a clear indicator to the management of mis-selling.
“Without whistle-blowers coming forward, these practices may never have come to light. In the past few years, whistle-blowers have contributed critical intelligence to the enforcement actions we have taken against firms and individuals.”
Alex Baldock, chief executive of Carphone Warehouse expressed how the firm was “disappointed” it had made mistakes in the past; however, it is a “very different business today.”
“As the FCA acknowledges, we’ve made significant improvements since 2015. We’re committed to stay on that trajectory, and to make sure all customers enjoy the right technology products and services for them.”
The FCA remarked that the company had failed to give their sales consultants the right training, as they would recommend customers to buy Geek Squad insurance even though they already had cover, for example through their home insurance or bank accounts.
When customers stated they might have a similar product or wanted time to think about it, they were advised to buy it and cancel it within 14 days to avoid being charged.
Regarding this the FCA remarked:
“This created a risk that customers would purchase insurance that they did not need and would be exposed to the risk of paying for it if they did not cancel in time.”
In the period under investigation, December 2008 to June 2015, Carphone Warehouse sold policies worth more than £444.7 million. A high proportion of which were subsequently cancelled.
Carphone Warehouse has not contested the FCA’s findings, resulting in a 30% discount on their fine, without which they would have had to pay more than £41 million.