The Financial Conduct Authority (FCA) has imposed a £5.4 million fine on Volkswagen Financial Services (UK) Limited (Volkswagen Finance) for failing to treat customers facing financial difficulties fairly. In addition to the fine, Volkswagen Finance has agreed to pay over £21.5 million in compensation to around 110,000 customers who were potentially harmed by its actions.
Failures in Support for Vulnerable Customers
Between January 1, 2017, and July 31, 2023, Volkswagen Finance failed to adequately assess the individual circumstances of customers who were struggling financially. Instead of offering tailored support, the company often took vehicles away from vulnerable individuals without considering alternative solutions. For many customers, losing their car—especially if it was essential for work or family life—put them in an even more precarious position. The company also relied on impersonal, automated communications, exacerbating the problem by failing to address the specific needs of those in financial difficulty.
FCA's Response and Redress Scheme
Following the FCA's investigation into how Volkswagen Finance handled struggling borrowers, the company set up a redress scheme to compensate affected customers. Volkswagen Finance has since made substantial improvements, including enhanced training for customer service staff and better communication practices. It has also introduced a new debt collection model aimed at better supporting customers in financial hardship.
Widespread Industry Scrutiny
Volkswagen Finance's failings were uncovered as part of the FCA's broader supervisory efforts to evaluate how lenders support borrowers in financial difficulty. Over the last four years, the FCA has worked with nearly 100 lenders, securing over £65 million in redress for more than 320,000 customers. Earlier this year, the FCA made permanent several borrower protection measures introduced during the pandemic to ensure continued support for those struggling financially.
Strong Message to Lenders
Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA emphasised the significance of the case, stating:
"For many, a car is not a luxury but a necessity for work or family life. Volkswagen Finance made tough personal situations worse by failing to consider what those in difficulty might need. It is right that they compensate those who suffered. This fine and redress should send clear signals to lenders that they need to properly support those in financial difficulty."
A Faster Enforcement Process
The investigation into Volkswagen Finance, which took 13 months to complete, is an example of how the FCA is speeding up its enforcement processes. The average length of investigations closed in 2023/24 was 42 months, making this case notably quicker.
Next Steps for Affected Customers
Volkswagen Finance will contact affected customers with details about the redress scheme. Customers do not need to take any action until they are contacted. However, those with questions, updated contact details, or who seek more information are encouraged to reach out to Volkswagen Finance through the contact information available on its website.
Volkswagen Finance and the Industry Context
Volkswagen Finance, one of the UK's largest motor finance providers, offers vehicle financing for several major automotive brands, including Volkswagen, Skoda, and Porsche. This case follows similar FCA actions against major financial institutions like HSBC, Barclays, Lloyds, and TSB for failures in treating financially distressed customers.
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