View this article online: https://www.claimsjournal.com/news/international/2006/09/06/72053.htm
The U.K.’s Financial Services Authority announced fines levied against Regency Mortgage Corporation Limited of £56,000 ($106,000) “for failures relating to its sale of mortgage related Payment Protection Insurance (PPI) in the sub prime market.”
The bulletin notes that this 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.”
The U.K.’s financial and insurance regulatory agency said: “Regency did not treat its customers fairly and failed to organize 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.”
The FSA also noted that “Regency’s breaches were particularly serious because as a specialist in the ‘Right to Buy’ market, its customer base consists primarily of sub-prime 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.”
FSA Managing Director for Retail Markets Clive Briault commented: “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.”
The FSA said it had discovered the breaches in a routine visit in August of 2005. These were reviewed, and further reviews are being conducted, with a goal of making sure that “customers who purchased PPI products from unsuitable recommendations receive appropriate redress.”
The FSA also noted: “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 percent discount under the FSA’s Executive Settlement Scheme – without the discount the financial penalty imposed would have been £80,000 [$152,500].”