The FCA’s recent decision to fine Carphone Warhouse £29.1 million is meat and drink to those who feel mobile phone companies should keep away from financial products. But it also serves as a great case study in all the mistakes firms can make when trying to improve conduct.
1. Don’t shoot the messenger
The FCA stated the mis-selling came to light mainly as the result of whistle-blowers and without them the problems might never have come to light. It shows the limit of the regulator’s reach but it also exposes the dangers of not having internal infrastructure in place to listen to whistle-blowers.
Carphone Warehouse had a number of opportunities to listen to reports of wrongdoing and put it right before the regulator got involved, but didn’t didn’t take them. Instead the company now finds itself with a hefty fine.
2. Don’t repeat the same mistakes
This is not the first time the company has fallen foul of the regulators. Back in 2006 Carphone Warehouse was also fined for mis-selling insurance products. In other words, this was not the first time they had been in trouble and the FCA took note.
Back in 2006 the company had run the usual line of mea-culpa and pledged to carry out a full investigation into what went wrong. The FCA viewed the fact that this review didn’t achieve much as an aggravating factor.
Failing to learn from past mistakes not only makes it more likely that you will repeat them, but in this instance, it also means the regulator will be harsher.
With all the market data available at the moment you don’t necessarily have to learn from your own mistakes. Analysing the errors of other companies such as Carphone Warehouse is a good way to ensure you don’t repeat their mistakes.
3. Work with, not against the regulator
There are also lessons for those companies which do run into trouble. The FCA’s partial settlement rules allow companies to accept some parts of a case against them and challenge others, but still be eligible for some or all of the settlement discount. The Carphone Warehouse, in this instance, accepted the facts of the case but challenges the proposed scale of the fine.
Last but most importantly, companies need to do more than pay basic lip service to the regulators. All too often it appears as if regulators are viewed as irritating teachers. Show enough contrition and they will go away until you make the same mistakes again. This judgement shows that this will not work. Companies will need to institute real and lasting change to avoid incurring higher fines in the future.