The Financial Conduct Authority (FCA) has imposed a fine of £5.4m on Volkswagen Financial Services UK for their failure to treat customers fairly between January 2017 and July 2023. The regulatory body found that the company’s practices had a negative impact on financially vulnerable customers, including the repossession of vehicles without exploring alternative solutions.
As a result, Volkswagen Financial Services UK has agreed to compensate affected customers, with a redress package totaling over £21.5m for approximately 110,000 individuals. This acknowledgment of harm caused to customers who heavily rely on their vehicles for essential travel, such as commuting to work, is a significant step towards rectifying the situation.
Therese Chambers, the joint executive director of FCA Enforcement and Market Oversight, emphasized the importance of lenders properly supporting those in financial difficulty. Chambers stated, “For many, a car is not a luxury but a necessity for work or family life. Volkswagen Finance exacerbated tough personal situations by neglecting to consider the needs of those in distress. It is crucial that they compensate those who have suffered. This fine and redress should serve as a clear message to lenders about the need to adequately support individuals in financial difficulty.”
The FCA’s enforcement action follows a period of supervisory work aimed at evaluating how lenders assist borrowers facing financial challenges. Customers affected by Volkswagen Finance’s shortcomings will be contacted directly regarding the redress scheme, and no immediate action is required on their part until they are approached by the company.
The investigation into Volkswagen Finance’s practices took 13 months to complete, revealing significant failings exacerbated by inadequate and automated communication processes. In a related development, Volkswagen Group recently announced the termination of labor agreements in Germany, a decision that could potentially lead to job reductions at six German plants. Reports suggest that the company has informed the IG Metall union of its intention to cancel several labor agreements, including one that guarantees jobs at these plants until 2029.
In conclusion, the FCA’s intervention in Volkswagen Financial Services UK’s operations underscores the importance of fair treatment and support for customers in financial distress. The redress package and fine signal a commitment to rectifying past mistakes and ensuring better practices in the future.
