Dixons Carphone Warehouse has been handed a £29.1 million fine from the Financial Conduct Authority for mis-selling its Geek Squad service. The FCA said Carphone Warehouse trained its staff in ‘spin selling’ its Geek Squad policy to customers who already had insurance policies in place and didn’t need it.
The FCA started its investigation after whistleblowers reported the company were forcing staff to push the insurance and technical support product onto customers. They were trained to recommend Geek Squad to customers who already had phone cover. The FCA said staff were also trained in ‘Objection Handling’ of focusing on customer protests rather than assessing whether the product was suitable for them. It added that the retailer failed to properly investigate and fairly consider customer complaints.
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. Without whistleblowers coming forward, these practices may never have come to light.”
The investigation found that Carphone Warehouse made sales of more than £444.7 million from Geek Squad between 2008 and 2015. The FCA said that 35 percent of the insurance policies were cancelled within the first three months of buying them, which is a clear indicator of mis-selling.
Carphone Warehouse said in response to the FCA investigation it had made significant improvements. The company has voluntarily carried out two customer redress programmes. They have enhanced staff training and compliance monitoring, investing in customer service and increasing the number of independent financial services staff in stores.
Alex Baldock, Chief Executive of Dixons Carphone Warehouse 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.”
Carphone Warehouse In Financial Trouble
Carphone Warehouse posted a loss of £440m for 2018, down from a profit of £54m a year ago. But it said underlying sales improved. The company has been struggling with slowing sales of mobile phones and in May announced the closure of 92 of its 700 stores. It has also issued a string of profit warnings which have prompted the share price to tumble by a quarter this year.
Boss Alex Baldock told BBC Radio 5 Live: “We continue to grow and we continue to gain share from our competition, but part of the transformation that we have to make is the turnaround of Carphone Warehouse, our mobile business.”
The company has faced a number of challenges, including falling demand for long-term mobile contracts and people not renewing their handsets as frequently. It had also seen weaker demand for computers.