Volkswagen unit fined £5.4m for mistreating vulnerable customers

The motor finance division of Volkswagen has been fined £5.4 million by the City regulator and is paying more than £21.5 million in compensation for “serious” failings in its treatment of customers in distress.
An investigation by the Financial Conduct Authority found a series of problems with the way Volkswagen Financial Services (UK) handled customers who had fallen behind on payments, including repossessing cars from those who were clearly vulnerable without entertaining other options.
The regulator’s inquiry identified the case of one troubled customer in arrears who had told the Volkswagen division that he had attempted suicide and repeatedly warned the company that he was struggling with a difficult divorce, the loss of his job and other problems including depression. Yet the unit did not change its approach towards him, even though he explicitly told it on one call “You are speaking to a vulnerable customer and you’ve not helped me”, and took back his car anyway.
The authority also cited another incident involving a young woman whose file at the Volkswagen division noted that she was “in floods of tears” when faced with the repossession of her vehicle.
The company is now paying redress to at least 109,589 individuals who suffered or who were at risk of detriment, including £17.8 million it has already distributed to 80,191 customers.
The £5.4 million fine is also the largest the authority has ever imposed on a motor finance business. Its inquiry into Volkswagen Financial Services is separate to a much broader review that it is conducting of potentially unfair commission arrangements in the car loans industry that stretches back to April 2007.
Therese Chambers, the regulator’s joint executive director of enforcement and market oversight, said: “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. 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.”
Volkswagen Financial Services is one of Britain’s biggest car loan businesses, providing credit for vehicle purchases and leasing deals for brands including Audi, Seat, Skoda and Porsche. The authority said the firm’s failings spanned the beginning of 2017 until the end of July last year, a period when the company had about 2.8 million accounts and a book worth £55.5 billion.
The watchdog identified a string of shortcomings, including “a lack of probing by VWFS to understand the nature of customers’ vulnerabilities” and making “limited, if any, attempts to call customers before taking their car away”. These problems were exacerbated by the firm’s use of templated communications during the collections process, it added.
Volkswagen Financial Services said: “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.”
The authority imposed a £10.9 million fine on TSB this month for its treatment of customers in financial difficulties, and levied a £6.3 million penalty on HSBC in May for similar problems. In 2020 Lloyds Banking Group and Barclays were fined £64 million and £26 million respectively for their handling of troubled customers.