The firm's statement said: "In November 2005, the FSA wrote a “Dear CEO” letter to the mortgage industry sector, outlining the findings of their thematic project concerning payment protection insurance (PPI). In order to ensure that Regency had treated its customers fairly, the directors instigated an internal review of its mortgage payment protection insurance (MPPI) sales, supported by its external auditors, Deloitte & Touche LLP.
"At the same time, the FSA launched an enquiry into Regency’s MPPI sales as one of the outcomes of the thematic work. Regency’s review identified that the majority of concerns centred on sales made before the new Regulations were introduced but the cover for which commenced afterwards. Regency are reviewing all its MPPI sales to ensure that, where customers may not have a policy appropriate to their circumstances, it is corrected.
"In deciding upon the disciplinary sanction the FSA recognised the following measures taken by Regency which have served to mitigate the seriousness of its failings (Final Notice, Section 1.7):
1. Regency has taken prompt steps to improve the collection of information about the customer’s personal circumstances and customer disclosure through an enhanced statement of demands and needs and statement of price.
2. Regency has co–operated fully with the enforcement action, agreeing the facts quickly and ensuring efficient resolution of the matter and has received full credit for settlement at an early stage.
"In their Decision Notice, the FSA have made the following observations:
1 The breaches of the rules were serious when considering the customer base of Regency, who was primarily from the non-conforming sector, but Regency did not deliberately or recklessly contravenes regulatory requirements (Final Notice, Sections 5.3 and 5.4).
2 Regency did not deliberately set out to accrue additional profits or avoid loss through the manner in which it sold MPPI (Final Notice, Section 5.6).
3 Regency has also made a number of improvements to its sales process, and has tried to address some of the weaknesses identified in the thematic visit and in response to the issues raised by the “Dear CEO” letter. Specifically, on 1 January 2006, Regency introduced revised documentation, which increased the amount of customer information recorded at the point of sale, including affordability, and ensured that the cost of interest to be added to single premium policies over the mortgage term was disclosed to customers. From this date Regency introduced documented sales procedures to accompany this document. On 1 March 2006, Regency changed significantly its approach to selling MPPI by moving to a telephone based sales regime, so that it could monitor and record advisers selling practices more effectively (Final Notice, Section 5.8).
"Regency are confident that the systems, procedures and enhanced monitoring and compliance regime currently in place have been designed to ensure that our customers’ interests are paramount, and that their particular circumstances have been fully appraised before any recommendation is made regarding an insurance product.
"The directors of Regency are satisfied that the Final Notice issued by the FSA has now given practical guidelines on how the principles and rules of regulation have to be applied to the sale of protection products. It is important during the sales process that customers needs and circumstances are fully understood so that they can get the right product at a price they can afford."
