The Financial Services Authority (FSA) has, for the first time, fined a mortgage broker for mis-selling payment protection insurance (PPI).
Regency's TV adverts focused on council house tenants
The FSA fined the Regency Mortgage Corporation £56,000 for selling the policies to customers who did not need them or on which they could not claim.
Last year the FSA found that a third of firms it surveyed were mis-selling this type of insurance.
The OFT launched a formal investigation into the sale of PPI in April 2006.
The insurance is sold to people so they can continue to repay their mortgages - or other debts such as credit card repayments - if they fall sick, have an accident or become unemployed.
Clive Briault of the FSA said Regency's customers had been treated unfairly.
"We have highlighted payment protection insurance as an area of high potential risk to consumers," he said.
"Regency Mortgage Corporation exposed its customers to an unacceptable level of risk."
Regency is based in Bournemouth but says most of its customers are in the North of England.
It specialises in selling "right-to-buy" mortgages to "sub-prime" customers - those who have little money and can find it hard to get credit.
Often they are council or housing association tenants exercising their right to buy their rented homes.
As such, the FSA judged they were at particular risk if they relied on a PPI policy that might exclude their claim - perhaps because they had a pre-existing medical condition or were self-employed.
In some other cases the customers already had cover in place from previous mortgages.
The FSA said the blame lay with the fact that the firm did not make enough checks on its customers' circumstances to make a proper sale.
The regulator would have levied a higher fine of £80,000 had Regency not settled at an early stage of the FSA's investigation.
Other firms are being investigated and the FSA warned they may be fined as well.