Regency Mortgage Corporation has been fined £56,000 by the FSA.
The mortgage firm was penalised for failures relating to the sale of payment protection insurance (PPI).
The PPI sales were in the sub-prime market, to clients with limited financial means and access to credit.
The FSA ruled that Regency breached its treating customers fairly (TCF) guidelines. Customers were sold policies for which they already had cover or under which they could not make a claim.
The regulator also penalised Regency for inadequate compliance and record keeping.
The FSA's managing director for retail markets, Clive Briault, 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 was awarded a 30% discount on the standard penalty of £80,000 by the FSA for agreeing to settle early.
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