(qlmbusinessnews.com Tues. 22nd Oct, 2024) London, UK —
FCA Fines Volkswagen for Failing Vulnerable Car Finance Customers in the UK
Volkswagen has been fined £5.4 million and ordered to pay £21.5 million in compensation after it was found to have mistreated vulnerable car finance customers in the UK, including those dealing with serious personal difficulties. The Financial Conduct Authority (FCA) revealed that Volkswagen Financial Services (VWFS), a subsidiary of the German automotive giant, failed to treat customers fairly, leading to significant harm for around 110,000 individuals.
VWFS was found to have repossessed vehicles with little warning from customers facing extreme hardship, including those who had attempted suicide or were caring for sick family members. These actions occurred between 2017 and July 2023, a period that spanned the Covid-19 pandemic and the subsequent cost-of-living crisis, when many people were struggling with financial stress beyond their control.
The FCA investigation highlighted multiple failures in the company's dealings with customers who were in financial difficulty. This included sending threatening letters and showing a lack of empathy in communications with vulnerable individuals. In one instance, the company failed to respond appropriately to a customer who had attempted suicide and continued to pursue them for repayments.
Car finance is a significant sector in the UK, with many new vehicles being purchased through finance arrangements offered by “captive” firms owned by manufacturers. Volkswagen Financial Services provides funding for brands within the Volkswagen Group, including Audi, Skoda, and Porsche, and made a profit of £276 million in 2023 while financing 400,000 vehicles.
The FCA has also launched a separate investigation into claims that car dealerships overcharged customers. Under UK consumer law, lenders must treat customers fairly, especially those experiencing financial hardship, but Volkswagen Financial Services was found to have exacerbated stress and anxiety for many vulnerable people.
Therese Chambers, Joint Executive Director at the FCA, emphasised the importance of treating customers in difficulty with care. “For many, a car is not just a luxury but a lifeline for work and family. Volkswagen’s failure to consider the needs of those in financial difficulty worsened already challenging situations. It is only right that they compensate those affected,” she said.
Volkswagen Financial Services has cooperated with the FCA’s investigation and avoided a larger fine of £7.7 million. The company has since introduced a new debt-collection model and has committed to providing goodwill payments to customers who suffered from its past practices.
A spokesperson for VWFS stated, “We acknowledge our shortcomings in these cases and have made significant improvements to ensure our services meet the needs of our customers. We continue to offer compensation and apologise for any distress caused.”
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