“surprising” FINE FOR CARPHONE

The Carphone Warehouse has called the £245,000 fine levied against it by the Financial Services Authority (FSA) for mis-selling insurance “surprising and disproportionate.”
Carphone CEO Charles Dunstone said: “We take every aspect of service and administration very seriously. The FSA response does, however, feel a bit like a sledge-hammer to crack a nut.”
The FSA found that, between 14 January and 24 October 2005, Carphone failed to send 118,000 customers who had bought mobile phone insurance through its telesales channel a statement of demands and needs (SDN) in written form. An SDN outlines the suitability of the insurance package in respect of their demands and needs.
The FSA also discovered that 56,000 of those customers also did not receive a policy summary, a document setting out the main terms and benefits of the insurance.
The FSA said the two factors represented a breach of its ‘Treating Customers Fairly’ principle, and could have led to rejected insurance claims and financial loss for customers.
The FSA said the size of the fine reflected Carphone’s failure to notify the FSA sooner, having become aware of its non-compliance with SDN requirements in March 2005. Carphone continued to sell insurance, regardless, until October.
“Firms must treat their customers fairly,” Sarah Wilson, FSA director of retail firms. “We will not hesitate to consider enforcement action in circumstances where a firm’s systems or actions leave open the potential for significant consumer detriment.
“Carphone Warehouse should have been open and provided complete and timely information to us.”
Carphone agreed to carry out a retrospective mailing of both documents to the affected consumers, and received a 30 per cent discount on its fine after settling the case early.
Nevertheless, Carphone feels aggrieved by the size of the fine. It said in a statement that customers had not suffered as a result and that the fine is actually symptomatic of its attempts to adhere to FSA guidelines.
Carphone said: “We find the FSA fine surprising and disproportionate. We believe that customers have suffered no disbenefit (sic). The fine is the result of our volunteering to be regulated by the FSA, which we need not have done and which the majority of our competitors have not done. It is the result of procedural issues in our smallest sales channel as we developed compliance systems, which we notified to the FSA. We would have expected more tolerance from the FSA instead of being heavily fined for a matter that took place within the first few months of being regulated.”

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