The Financial Conduct Authority (FCA) has imposed a £5.4 million fine on Volkswagen Financial Services (UK) Limited for failing to treat customers in financial difficulty fairly. In addition to the fine, VWFS UK has committed to paying over £21.5 million in compensation to approximately 110,000 customers who may have been adversely affected by these shortcomings.
VWFS is a top UK motor finance provider offering vehicle financing for various brands, including Volkswagen, Skoda, and Porsche.
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According to the FCA, between 1 January 2017 and 31 July 2023, the company failed to adequately understand its customers’ individual financial situations, resulting in a lack of tailored support. In some cases, vulnerable customers lost their cars, despite other potential options, worsening their financial and personal circumstances, especially for those dependent on vehicles for work. The FCA also highlighted issues with templated and automated communications that contributed to these failings.
The FCA’s intervention led to the creation of a redress scheme for affected customers, with VWFS taking steps to improve its staff training, communications, and debt collection model.
The company’s failings came to light during the FCA’s supervisory work, part of a broader effort to assess how lenders support customers in financial distress. Over the past four years, the FCA has worked with nearly 100 lenders to improve the treatment of struggling borrowers, securing more than £65 million in compensation for over 320,000 customers. Earlier in 2024, the FCA strengthened borrower protections by permanently adopting measures introduced during the pandemic.
Therese Chambers, Joint Executive Director of Enforcement and Market Oversight at the FCA stated: “For many, a car is not a luxury but a necessity for work or family life. [VWFS[ exacerbated difficult personal situations by failing to meet the needs of those in financial hardship. It is appropriate that those affected are compensated. This fine and redress signal the importance of properly supporting customers in difficulty.”
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By GlobalDataThe FCA’s enforcement case, which stemmed from its supervisory work, was completed in 13 months, significantly faster than the average investigation time of 42 months in 2023/24. The fine imposed on VWFS was reduced from £7.7 million due to the company’s agreement to resolve the matter, qualifying for a 30% discount.
