More than three million consumers could be in line for compensation as another mis-selling scandal is revealed by the UK financial watchdog.
This time it’s retail stores and garages – not the banks – who are coming under fire as a Financial Conduct Authority (FCA) investigation has uncovered ‘serious and widespread issues’ with the sale warranties on electronics and white goods.
One in three
The FCA believes that as many as one in three people may have purchased potentially unnecessary or worthless policies and, with echoes of the on-going PPI mis-selling scandal, could now be in-line for their share of millions of pounds in compensation.
Consumer affairs journalist Kate Morley says: “The majority of policies believed to have been mis-sold are warranties from high street retailers specialising in electronics and white goods.”
The FCA say the warranties were sold by sales assistants who had a poor understanding of insurance rules and generally did not know they were putting customers at risk of financial harm.
Their findings follow an investigation by consumer champion Which? three years ago in which they accused stores like Currys, PC World and Tesco of misleading customers into buying unnecessary or worthless policies.
Says Ms Morley: “It found staff were basing sales of extended warranties on misleading claims about what was covered by policies and condemned them for using “hard-sell” tactics to seal the deals.”
The warranties concerned cost anywhere between just a few pounds and many hundreds which means the amount of redress payable will vary greatly.
It is understood the FCA is now investigating the extent of the mis-selling and who is responsible. Shops, travel agents and garages are not authorised by the FCA to sell insurance. They act as ‘appointed representatives’ of insurance firms and brokers who provide a licence allowing them to sell their policies.
The investigation will examine the extent to which the system is harming consumers and is likely to involve the chief executives of those who issue licences to discuss what action needs to be taken.
Evidence of mis-selling
Alex Neill of Which? says: “These are serious findings from the FCA and where there is evidence of mis-selling, consumers deserve redress. The companies involved should be proactively identifying those customers affected and acting quickly to compensate them.”
Industry commentator Matt Browne says: “The findings are likely to have come as a shock. Whilst many insurers and brokers take their responsibilities with appointed representatives very seriously, the FCA is keen to ensure the very highest standards are being upheld for customers.”
Steve White, chief executive at the British Insurance Brokers’ Association, which represents the insurers and their brokers, said: “We will be working with the FCA to ensure that the key findings of the review are shared with our members and to help them think about their own processes and controls.”