£30million
That’s the huge fine dished out to Carphone Warehouse for selling insurance to customers ... even if they didn’t need it
CARPHONE Warehouse has been fined nearly £30million for mis- selling mobile insurance on a huge scale.
Staff were trained to pressurise customers to take out its Geek Squad cover regardless of whether or not they needed it – raking in £445million between 2008 and 2015.
It is understood 28,000 customers were potentially mis-sold the mobile phone insurance and technical support product by salesmen trained in a process called ‘spin selling’, which made the policies ‘very difficult to refuse’.
City watchdog the Financial Conduct Authority (FCA) yesterday criticised the firm for its tactics and failure to investigate complaints from customers, many of whom would already have similar cover with their home insurance or bank.
The investigation, which was triggered by a whistleblower, revealed staff were paid a commis- sion bonus to get customers to purchase the cover with the promise they could cancel it within two weeks if they found they did not need it. So far customers have been refunded close to £1million.
The whistleblower said: ‘When selling Geek Squad insurance, [a colleague] does not always go over the policy fully and always uses 14 days to cancel as a way to sell it, which probably means 90 per cent of the policies are being cancelled yet he is still getting the bonus.’
One customer complained it was something ‘I don’t even want and I did not ask for’, while another said she ‘did not really want it in the first place but they pressured you into getting it’.
In January 2014, 35 per cent of policies were cancelled within three months. The FCA said such a high cancellation rate was an indication of mis-selling that Carphone Warehouse failed to consider.
Mark Steward, executive director of enforcement and market oversight at the FCA, said: ‘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.’
Carphone Warehouse and electronics retailer Dixons merged in 2014. The Dixons Carphone group has contacted customers it believes may have been affected by the previous regime to offer compensation.
Dixons Carphone chief executive Alex Baldock said: ‘We’re 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.’
‘Pressured you into getting it’