PAS is an insurance intermediary which administers mobile phone insurance policies sold by Phones 4u Limited (Phones 4u); it is responsible for customer relations, claims and complaints linked to these sales.
During its investigation, which was begun by the Financial Services Authority, the FCA found significant failings in the way PAS handled complaints. Underlying all of the failings was PAS’s failure to record complaints, meaning that management information and regulatory reporting was wrong.
Other serious shortcomings revealed during the investigation included the following:
- Complaints were not investigated fully or resolved appropriately or consistently;
- Complaints about mis-selling were often rejected just because the customer had signed a Direct Debit form, but it was not clear why PAS thought this alone indicated a valid sale; and
- The failure to investigate and address the root-cause of complaints about the sale of insurance policies, such as mis-selling.
Taken together these failings meant that PAS was unable to treat customers fairly and come to a balanced decision about whether or not complaints had substance. Nor was it able to accurately detect areas that were repeatedly being complained about so it could put them right and improve its customers’ experiences. These standards are expected of all regulated firms and are designed to ensure that when problems do occur, they are quickly identified and corrected.
Since the investigation, PAS has employed a third party to review its complaints processes. In addition, PAS has conducted a separate review to identify customers that suffered a loss and pay them redress. PAS has reviewed 7,099 complaints and paid compensation to 1,438 customers.
Tracey McDermott, the FCA’s director of enforcement and financial crime, said:
“In any business things can go wrong. Where it does it is in the interests of both consumers and firms to put it right. Proper complaints handling is essential to ensure customers are treated fairly. It is also a key tool to help firms identify where things are not working as they should and allow them to take steps to put problems right themselves. Where this is done effectively it not only means a better relationship between firms and their customers but also avoids the cost and reputational damage of regulatory action.
“PAS had wide ranging failures across its complaints handling processes - it failed to investigate complaints properly or to keep accurate records. This is simply not good enough - it does not meet our requirements and does not meet the needs of customers.
“Last week we published the findings of a review into mobile phone insurance which found that sometimes there was a gap between what customers expect, and what they are really getting. There are common themes in this case that revolve around consumer expectations and how they are sometimes being treated in practice. That review publication and this Final Notice stand side by side and I wholeheartedly recommend that all insurance firms – not just those in the mobile phone insurance market - read the two together.”
PAS settled at an early stage of the investigation and therefore qualified for a 30 per cent discount. Without the discount the fine would have been £4,049,637.
Notes to Editors
- The final notice[1] for PAS.
- The FCA’s review into mobile phone insurance[2] was published in June 2013.
- On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA, as well as how it is different to the PRA.