I cant understand how the Police could have dealt with this matter by means of a fixed penalty and points
Yes they can - It came into effect in 2003 (or thereabouts). 200 pound and 6 points is the 'norm' for this offence when issued with a FP.
Equally the chap who lent him the vehicle is also subject to a fine and points for 'allowing' it.
The only people who will know will be you and your licence
Well - and of the course the Police and DVLA will know etc.
DVLA Reminds Motorists of New Motor Insurance Law