Carphone Warehouse has been fined £29.1m by the City watchdog for mis-selling Geek Squad, a mobile phone insurance and technical support product.
The Financial Conduct Authority found that Carphone Warehouse failed to give its sales consultants the right training to offer suitable advice to customers purchasing the product. It said they were trained to recommend it to customers who already had cover through their home insurance or bank accounts.
The watchdog carried out an investigation after being alerted by whistleblowers – without whom “these practices may never have come to light”.
Between 1 December 2008 and 30 June 2015, the company sold Geek Squad policies worth more than £444.7m, a high proportion of which were subsequently cancelled.
Mark Steward, executive director of enforcement and market oversight at the FCA, 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.”
If Carphone Warehouse – part of the listed group Dixons Carphone – had not cooperated with the watchdog, the fine would have been £41.6m.
The FCA said sales staff at Carphone Warehouse were trained in “spin selling”, which focuses on persuading customers to purchase the product with no training provided on how to respond if customers said the policy may not be appropriate. Sales staff were also trained in “objection handling”, focusing on overcoming customer objections rather than assessing whether the insurance was suitable for them.
When customers complained, the company failed to properly investigate and fairly consider their complaints, the watchdog added.
Carphone Warehouse said it agreed with the findings and would not appeal. It voluntarily refunded £948,777 to customers in 2016 and last year embarked on another compensation programme.
Alex Baldock, the chief executive, said: “We’re obviously disappointed that Carphone Warehouse fell short in the past. But we’re 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.”