The UK's Financial Conduct Authority (FCA) has fined The Carphone Warehouse over £29m for mis-selling Geek Squad mobile phone insurance to its customers between 2008 and 2015.

Carphone

Image: Carphone Warehouse’s Westfield store. Photo: Courtesy of Dixons Carphone plc.

After investigation, the FCA concluded that the staff at Carphone Warehouse was not given proper training for giving suitable advice to customers and they only concentrated on selling the insurance.

The staff was not trained to adequately assess a customer’s need to determine whether the insurance was suitable for the customer or not. Instead, the focus was only selling Geek Squad’s insurance.

The staff was trained in ‘objection handling’, which is, if the customer mentioned that he or she did not need the insurance or that they already have an insurance cover, the staff would convince such customers into buying the insurance anyway.

Carphone staff convinced customers saying they could cancel the insurance in 14 days, if the policy was unnecessary.

During the said period between 2008 and 2015, Carphone Warehouse sold over £444m worth of Geek Squad insurance to its customers. And, a high proportion of such policies were subsequently canceled early.

In January 2014, about 35% of policies were cancelled in the first three months from inception. High cancellation rates are an indicator of a risk of mis-selling which The Carphone Warehouse failed to properly consider, FCA stated.

When customers complained about Geek Squad insurance sale, the mobile phone retailer is said to have failed to properly investigate and fairly consider the complaints. This resulted in valid complaints not being upheld, where the insurance had been mis-sold, the watchdog said.

FCA enforcement and market oversight executive director 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.”

The company also stated that in the past, its practices fell short. It claims to have compensated for the shortcomings by introducing more comprehensive customer-needs assessments, improved staff training and compliance monitoring and customer service.

Dixons Carphone group CEO Alex Baldock 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.”