Volkswagen’s car finance arm has been fined £5.4 million by the UK’s financial watchdog for failures that included taking cars away from vulnerable people.
The motor finance firm, Volkswagen Finance, will also pay compensation to about 110,000 affected customers.
The Financial Conduct Authority (FCA) said the lender failed to understand its customers’ individual circumstances or to provide tailored support, over a six-year period between January 2017 and July 2023.
These failures meant that, in some cases, the company took cars away from vulnerable people without considering other options for them.
Volkswagen Finance made tough personal situations worse by failing to consider what those in difficulty might need
Therese Chambers, FCA
The lack of support was made worse by the lender using poorly templated and automated communications to engage with customers, the watchdog said.
Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, said: “For many, a car is not (just) a nice thing 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.”
Volkswagen Finance has agreed to pay £21.5 million in total compensation to about 110,000 customers who the FCA said may have suffered harm because of the failings.
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
Volkswagen Finance spokeswoman
“This fine and redress should send clear signals to lenders that they need to properly support those in financial difficulty,” Ms Chambers added.
The car finance firm would have been fined £7.7 million but it qualified for a 30% discount because it agreed to resolve the issues identified by the regulator.
It has since made improvements to its communications and how customer service staff are trained, as well as updating the way it collects debts.
A spokeswoman for Volkswagen Finance 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 FCA earlier this month fined TSB Bank £10.9 million for failing to treat vulnerable customers fairly between 2014 and 2020.
The bank has paid nearly £100 million in redress to more than 230,000 mortgage, overdraft, credit card and loan customers found to have been affected.