The FSA has given Regency Mortgage Corporation a £56,000 fine which marks the first action the FSA has taken against a firm for sales of payment protection insurance since the regulation of the general insurance market.
The firm was fined for not treating customers fairly when selling mortgage related PPI in the sub-prime market. The failures were discovered when the FSA visited the firm in August 2005 as part of its thematic review into PPI. The fine also relates to failures in organising and controlling its business effectively.
The FSA says the breaches are particularly serious due to the nature of the market that the firm was operating in as its customer base consisted of those with limited financial means.
Regency was also found not to have collected sufficient information during PPI sales to ensure its advice met the customers’ needs. Customers were sold a policy in some cases where they already had cover or where they were unable to claim under parts of the policy.
In addition the FSA says Regency had inadequate procedures for compliance and record keeping.
GI regulation was introduced in January 2005 and PPI has recently received a lot of attention from the Office of Fair Trading which completed an investigation into the sector last month. The OFT report found widespread abuse within the PPI sector relating to sales processes, high commissions and lack of adequate advice given to consumers.
FSA managing director for retail markets Clive Briault says: “We have highlighted payment protection insurance as an area of high potential risk to consumers and we said following our thematic review last year that we were considering enforcement action where serious breaches had been identified.
“Regency Mortgage Corporation Limited exposed its customers to an unacceptable level of risk and our action sends out a message to firms operating in the payment protection market that they must operate in a way that treats their customers fairly and meets regulatory requirements.”
Regency is carrying out a past business review in response to the FSA’s action which will ensure customers who were sold unsuitable products will receive compensation.