Volkswagen Finance fined by FCA for unfairly treating vulnerable customers

The City regulator has fined Volkswagen’s UK financial services arm £5.4m for its unfair treatment of customers in financial difficulty, which it said may have caused them harm.

The Financial Conduct Authority (FCA) said Volkswagen Finance agreed to pay out more than £21.5m in compensation to roughly 110,000 affected customers after the investigation.

Between 1 January 2017 and 31 July 2023, Volkswagen Finance took cars away from vulnerable customers without considering other options, the FCA said.

It added that this move risked putting customers in a worse position, especially if they commuted to work by car.

Volkswagen Finance failed to understand customers’ individual circumstances or to provide support tailored to their needs, the FCA said.

The regulator found these failings were made worse by poor communications that were templated and automated.

The FCA noted that its work had resulted in Volkswagen Finance making improvements to its training for customer service staff and communications, as well as introducing a new debt collections model.

Volkswagen Finance agreed to resolve the matters and therefore qualified for a 30 per cent discount, reducing its fine from £7.7m.

The regulator identified the issues as part of its sector-wide review into how lenders support borrowers in difficulty. It has engaged with almost 100 lenders over the last 4 years, securing more than £65m in compensation for over 320,000 customers.

“For many, a car is not a nice to have but a necessity for work or for family life. Volkswagen Finance made tough personal situations worse by failing to consider what those in difficulty might need,” said Therese Chambers, the FCA’s joint executive director of enforcement and market oversight.

“It is right it compensates those who suffered. This fine and redress should send clear signals to lenders that they need to properly support those in financial difficulty.”

A Volkswagen Finance spokesperson commented: “We recognise our shortcomings in these past cases and have made significant adjustments over recent years to ensure that we are always delivering the right level of service.

“We are in the process of concluding our remediation efforts as we continue to provide goodwill payments to affected customers and apologise for any detriment caused.”