The Financial Conduct Authority (FCA) has levied a £29,107,600 fine on Carphone Warehouse after finding staff were trained more in countering customer objections than assessing whether the product was appropriate.
The FCA found the company had trained staff in “spin selling” the add-on product, persuading customers to buy the product regardless of whether they needed it.
The fine is the third largest levied by the FCA this financial year. The misconduct predates new rules that came into force in October, stipulating that insurers need to ensure retailers only sell products that meet customers’ needs. The rules apply to any company, even if they are not regulated by the FCA.
The watchdog said sales consultants were not trained to gauge customers’ needs to see whether Geek Squad was suitable and instead were told to recommend the product to customers who already had cover — for example through their home insurance or bank accounts, according to findings published on Wednesday.
“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,” said Mark Steward, executive director of enforcement and market oversight at the FCA.
‘Without whistleblowers coming forward these practices may never have come to light. In the past few years, whistleblowers have contributed critical intelligence to the enforcement actions we have taken against firms and individuals.’
The conduct that led to Wednesday’s fine began only two years after the earlier fine. In the period investigated, between December 2008 and June 2015, the retailer sold £444.7m worth of Geek Squad policies, with many of these being cancelled early, which the regulator said pointed to mis-selling. In January 2014, 35 per cent of policies were cancelled within the first three months.
Customers who asked to think about it were encouraged to purchase the product and cancel within 14 days. The FCA pointed out that 35 per cent of policies did indeed cancel within the first three months, which the regulator said the company did not properly consider as a red flag.
Carphone Warehouse did not dispute the FCA’s findings, which led to a reduction of the fine by 30 per cent from £41.6m.
The group said on Wednesday it “accepts that in the past the company’s practices fell short”. It added: “As the FCA acknowledges in its decision, ‘Carphone Warehouse has made significant improvements to its approach to regulatory matters’ since 2015.”
Dixons said the fine would not affect the guidance it gave in a trading update in January, as it had recorded a provision in its interim financial statement on December 12.
Customers of The Carphone Warehouse who think that they may have been mis-sold Geek Squad should contact the firm directly:
- by telephone: 0800 049 6190
- by post: Geek Squad, PO Box 358, Southampton, SO30 2PJ
- online here
If customers are not content with the firm’s response, they may then refer the matter to the Financial Ombudsman Service.