The Financial Conduct Authority (FCA) has fined Carphone Warehouse £29 million for mis-selling mobile phone insurance.
Whistleblowers had tipped off the regulator that the firm had failed to train staff properly in advising customers to buy Geek Squad mobile insurance.
An investigation found staff were trained in spin-selling. Designed to recommend Geek Squad to customers who already had insurance either on their home policy or via their bank.
Even if customers advised the sales staff that they already had a similar product or wanted time to think about it that they should buy a Geek Squad policy and cancel it within 14 days if they decided not to go ahead.
The FCA said: “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.”
The regulator said that between December 1st 2008 and June 20th 2015 Carphone Warehouse sold policies worth more than £444.7 million with a high proportion later being cancelled.
An FCA spokesman said: “High cancellation rates are an indicator of a risk of mis-selling which The Carphone Warehouse failed to properly consider.”
The firm’s boss said it was ‘disappointed’; it had fallen short in the past but it ios ‘a verfy different business today’.
Little or no value
FCA executive director of enforcement and market oversight, 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 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.”
Carphone Warehouse chief executive, Alex Baldock, said: “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.”
They set aside £2.3 million to compensation 28,000 customers – an average of £80 per customer.
As a result of not contesting the FCA’s findings the firm qualified for a 30% discount on the penalty. Without it they would have been fined more than £41 million.