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Financial regulators have issued Volkswagen Finance, the motor lending arm of the car manufacturer, with a £5.4mn fine for failing to treat customers in financial difficulty fairly.
The Financial Conduct Authority on Monday said that between 2017 and 2023 the company had failed to understand borrowers’ circumstances and support them accordingly. It added that Volkswagen Finance had agreed to pay more than £21.5mn in redress to about 110,000 customers who may have suffered harm because of those failings.
The lender had taken cars away from some vulnerable customers without appropriately considering other options, the FCA said, risking “people being put in a worse position, particularly if they relied on their car to travel to work”.
The watchdog said the lender had made “limited, if any, attempts to call customers before taking their car away” and did not entertain forbearance including when customers had made reasonable offers to pay arrears.
“For many, a car is not a nice-to-have but a necessity for work or for family life,” said Therese Chambers, joint executive director of enforcement and market oversight. “Volkswagen Finance made tough personal situations worse by failing to consider what those in difficulty might need.”
Volkswagen Finance’s failings were “compounded by poor templated and automated communications”, said the FCA. The findings resulted in the lender setting up a redress scheme to compensate customers and introducing a new debt collection model.
In one instance, the lender sent “correspondence that [a borrower] considered to be threatening” just two weeks after he had told the company he had recently tried to take his own life, according to a case study set out by the FCA. An agent he spoke with displayed “a lack of empathy” through sarcastic remarks, while it took 11 months to formally flag him internally as a vulnerable customer, the watchdog said.
Volkswagen Finance said it had made “significant adjustments” to improve its service in recent years.
“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.”
The fine, which follows a wider review of lender’s treatment of borrowers in difficulty, comes as the financial watchdog is also investigating the potential mis-selling of historic car finance loans. The FCA is probing a practice banned in 2021 that allowed car dealers to set their own interest rate on repayment plans.
Volkswagen Finance is one of the UK’s largest motor finance providers, lending to buyers of a range of motor brands including Volkswagen, Škoda and Porsche.