Financial Misseling is generally a sales practice in which a product or service is intentionally misrepresented, or a customer misrepresented about its suitability. Mis-selling may involve the deliberate neglect of the storage of basic information or the sale of a product that is not suitable for the customer's needs and preferences. Financial Misseling is unethical, and there may be legal action, fines, or professional reprimands for those who have financial misselling.
Understanding of Financial Misselling
Financial misselling poses a major problem in the financial services industry as well as financial sector regulators. Financial misselling occurs because of inappropriate or untrue advice, risks are not really disclosed, or the correct service is not provided despite understanding what the need is, and the right product is not provided to the person. Experiencing these consequences can happen in daily life, and if financial misselling has happened to someone, that person can give the victim to the case. One thing that should not be forgotten is that a product or service cannot be complained about or sued because it does not give the desired performance, let's call it an investment if the risks of this product or its suitability for people are wrongly reflected, a lawsuit or complaint can be filed. Therefore, people should analyze the risks of any investment they have made.
There are two types of financial misselling, and it is important to distinguish these types from each other. The first of these types of financial misselling is a material misrepresentation, and the second is suitability. First of all, to talk about what material misrepresentation means, if a material presented to individuals is misrepresented, that is, when a product or service is marketed differently than it appears, it is called financial misselling. The important thing is that the seller deliberately made this transaction because if a seller deliberately provided incomplete information about the relevant item, it would be financial misselling. Secondly, if suitability explains the misselling, selling a product or service that is not suitable for customers would be the suitability misselling. An example of this is invalid insurance. As a result, if any company is caught doing financial misselling, it must compensate its customers for lost money.
Example of Financial Misselling
Financial Misseling in our daily lives when buying a product or mortgaging a product, etc., is an event that we can experience. For this, one must be careful. In the case of financial misselling, customers can sue the other party.
People can sell mortgages incorrectly, and there are some common ways to get that sale. For example, they are borrowing money without proof of income, mortgage expiration date after retirement, advising lenders to change without information about fees and penalties. Giving a flat rate mortgage and then telling you to re-loan for a better deal, in this case also facing penalties for early abandonment of the flat rate. In addition, situations such as the fact that the consultant's commission will receive from the lender have not been announced.
There are some ways that investments can be sold incorrectly, and it is important to know these ways. There are various types of investment products that can be sold incorrectly, such as company stocks, profit bonds, managed portfolios. Financial advisors may not be able to explain the risky investments and events on these products accurately and may have sold the product. How the money will be invested may not have been saying for investments. When discussing with the consultant for the product to be invested, it may not be suitable for your needs or attitude towards the risk.
On the other hand, there is a crucial point: it should be considered, remembering that the profit or loss obtained with these investment products is not an important indicator of whether you are sold wrongly. Some investment products are high-risk but only sold incorrectly if you are not aware of these risks when investing.
Mis-sold Personal Content Purchase (PCP)
Personal content purchase opportunities are currently the most popular way for people to purchase cars, and it has accounted for 90% of all car purchases in recent years. With a PCP, the auto retailer is also a financial broker and designs the customer's payment schedule. Because of these companies' commission structures, thousands of customers have been sold incorrectly or overcharged customers.
The Financial Conduct Authority (FCA) estimates that misselling PCP costs customers up to £ 300 million annually. If you bought a car through PCP financing, your broker might have made you the wrong sale by keeping information about the structure of the deal, in which case it is very important to pay attention to the purchase.
Payment Protection Insurance (PPI) misselling
There are several ways PPI can be sold incorrectly, for example, policy exceptions in this regard may not be said or explained correctly, you may have been forced to purchase the PPI, you may not have been told that you can buy PPI from another company, the PPI is mandatory for you and you must remove it.
The terms and conditions related to PPI may not be fully explained, the rules regarding pre-existing medical conditions may not be stated or not explained correctly. In addition to these, the PPI may not have been told how the commission will work, and they may not have been asked if you have other insurance that can cover the loan.
In the past, many banks have had to pay compensation to customers who have made financially wrong sales, so their reputation has been damaged and has been heavily scrutinized. In this regard, regulators such as the Financial Conduct Authority (FCA) are engaged in activities to resolve these issues. Also, In the past years, companies have had to pay high amounts of compensation for financial misselling.