It is the first time the FSA has taken action against a firm for sales of PPI since the regulation of general insurance started in January 2005.
Regency did not treat its customers fairly and failed to organise and control its business effectively. In particular, Regency did not collect sufficient information during a PPI sale to ensure its recommendations met customers' demands and needs. In a number of cases customers were sold a policy for which they already had cover or were sold a policy under parts of which they were unable to claim. In addition, both Regency's procedures for compliance and record keeping were inadequate and senior management did not receive sufficient information to identify risks in PPI sales.
Regency's breaches were particularly serious because as a specialist in the "right-to-buy" market, its customer base consists primarily of non-conforming customers who traditionally have limited financial means and access to credit. The risks for these customers are therefore high if they are not eligible to claim on a recommended PPI policy or if the policy is not suitable for their demands and needs. The cumulative effect of the failings in the firm's systems and controls exposed their customers to an unacceptable risk of being sold PPI policies which were not suitable for their needs.
Clive Briault, managing director for retail markets, said: “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’s failings, which breached a number of FSA Principles and Rules, came to light during a visit to the firm in August 2005 conducted as part of the FSA’s PPI thematic work. In response, Regency commenced a review of its systems and controls in relation to the sale of PPI. As a result of the review Regency is carrying out a past business review of PPI policies sold between 14 January and 31 October 2005. The objective of the past business review is to ensure that customers who purchased PPI products from unsuitable recommendations receive appropriate redress.
In determining the level of penalty the FSA has taken into account Regency's financial resources and sought to ensure that the penalty is not set at a level that would prohibit Regency from completing its past business review and providing redress where appropriate. By agreeing to settle at an early stage of the FSA investigation the firm qualified for a 30 per cent discount under the FSA’s Executive Settlement Scheme – without the discount the financial penalty imposed would have been £80,000.
