Volkswagen fined £5.4m after mistreating vulnerable clients

Volkswagen’s motor finance division has been fined £5.4m by the City regulator, and will pay more than £21.5m in compensation. This is for its “serious failures” in treating customers in distress.

The Financial Conduct Authority conducted an investigation into the manner in which Volkswagen Financial Services (UK), a subsidiary of Volkswagen, handled customers who fell behind on their payments. This included repossessing vehicles from those who appeared to be vulnerable without considering other options.

The inquiry of the regulator identified a case of a customer who was in arrears and had repeatedly told the Volkswagen division he tried to commit suicide. He also warned them that he struggled with a divorce, he lost his job and many other issues including depression. The unit didn’t change its attitude towards him despite the fact that he told them on one occasion “You are talking to a vulnerable client and you haven’t helped me” and returned his car.

The authority also cited an incident in which a young girl was reportedly “in floods” of tears when confronted with the repossession her car.

The company has now paid redress of at least £17.8million to 80,191 clients who have suffered or were at risk.

The £5.4m fine is the biggest the authority has ever imposed against a motor financing business. The authority’s investigation into Volkswagen Financial Services was separate from a much wider review it is currently conducting on potentially unfair commission arrangements within the auto loans industry, which dates back to April 2007

Therese chambers, the regulator’s joint executive director for enforcement and market supervision, stated: “For many people, a vehicle is not just a nice to have,’ but rather a necessity, whether for work or family life. Volkswagen Finance exacerbated difficult personal situations by not considering what people in need might require. It’s right that it compensates those affected. This fine and redress will send a clear signal to lenders to support those who are in financial difficulties.

Volkswagen Financial Services, one of Britain’s largest car loan companies, provides credit for vehicle purchase and leasing deals, including brands such as Audi, Seat Skoda, and Porsche. The failures of the company spanned from the start of 2017 to the end of last July, when it had 2.8 million customers and a book of £55.5 billion.

The watchdog found a number of deficiencies, including “a failure by VWFS in order to fully understand the vulnerabilities of its customers” and “limited or no attempts to contact customers prior to taking away their vehicle”. The use of templates in the collection process exacerbated these problems, the watchdog said.

Volkswagen Financial Services stated: “We acknowledge our shortcomings in the past and have made substantial adjustments over the last few years to ensure we are always providing a high level of service.” We are currently in the process to concluding our remedy efforts, as we continue to offer goodwill payments to those affected and apologize for any harm caused.

fined TSB £10.9 Million this month, for the way it treated customers with financial problems. also fined HSBC £6.3 Million in May. Lloyds Banking Group, Barclays and HSBC were each fined £64 and £26 millions in 2020 for the way they handled customers with financial difficulties.