“Firms must put the interests of customers first” warns the FCA as it hands down its largest ever retail conduct finePrint publication
Failings by insurance intermediary HomeServe Membership Limited (HomeServe) have resulted in the company being fined £30.6 million, the largest amount ever imposed by the Financial Conduct Authority (FCA) for the retail sector in what the regulator described as “serious, systematic and long running failings”. The fine would have exceeded £40.7m had HomeServe not qualified for a 30% discount by agreeing to settle at an early stage of the FCA’s investigation.
The FCA said that HomeServe’s profit driven culture had led to the company taking advantage of existing customers. It considered the failings to be particularly serious given the vulnerable nature of the customers affected by HomeServe’s compliance failures, a substantial proportion of which were of retirement age.
The FCA criticised HomeServe’s approach to investigating complaints, its mis-selling of insurance policies, and failures by both senior management and the board to engage with compliance matters and to address risks to customers regarding cost implications.
Through failing to take reasonable care to organise and control its affairs responsibly and effectively, HomeServe is expected to pay out a total of £16.8 million in redress to affected customers, in addition to the £30.6 million fine. The FCA stressed that “firms must put the interests of customers at the heart of their business if we are to restore trust and confidence in financial services”.
It is crucial that businesses avoid what the FCA deemed in HomeServe’s case to be a focus “on quantity not quality” in all dealings with customers, particularly in light of the current focus on reform of consumer rights law with the Consumer Rights Bill currently progressing through Parliament.
This record fine by the FCA is a clear reminder that financial services businesses must have proper regard to customers and ensure that the culture, controls and remuneration procedures and structures in place are not detrimental to customers.
For more information contact Walker Morris Regulatory Group partner, Andrew Northage.