FSA fines The Carphone Warehouse £245,000

The FSA has fined The Carphone Warehouse £245,000 for not treating customers fairly in sale of GI products and failing to inform the regulator in a timely manner of significant systems failures.
The FSA says an investigation between 14 January and 24 October 2005 found The Carphone Warehouse failed to send 118,000 customers who bought mobile phone insurance through its telesales channel a Statement of Demands and Needs in written form.
The regulator says it subsequently discovered that 56,000 of these customers also did not receive a policy summary setting out its main features.
The FSA says this was a ‘serious failing’ as both documents contain important information to help customers understand the policy they are buying and breached TCF rules.
The FSA says the level of the fine also reflects the firm’s failure to notify the regulator of the problems in its telesales distribution channel in a timely manner.
The Carphone Warehouse became aware of its non-compliance with the SDN requirement in March 2005 but from March to October that year the firm continued to sell insurance when it knew it was not complying with the FSA’s rule.
The firm did agree to carry out a retrospective mailing of both documents to affected customers and has committed to a comprehensive review to minimise the risk of consumers being disadvantaged in the future.
It received a 30 per cent discount on its fine as it agreed to settle the case at an early stage.
FSA director of retail firms Sarah Wilson says: “The Carphone Warehouse failed its telephone sales consumers by not giving them all the information necessary for them properly to understand the insurance product they had bought.
Customers were therefore exposed to the risk of being left with an insurance policy which was unnecessary or provided incomplete cover leading to rejected claims. In either case they could suffer some degree of financial loss.
The Carphone Warehouse Ltd should have been open and provided complete and timely information to us. As a result of the extended delay in fixing the problem, over 100,000 customers were potentially disadvantaged. The FSA expects firms to inform us of any significant issue especially when there could be consumer detriment.”