German carmaker Volkswagen’s financial services arm has been fined by UK financial regulators for mistreating customers who are in financial difficulties.
The Financial Conduct Authority (FCA) has fined Volkswagen Financial Services (VWFS) Limited £5,397,600 for failing to treat fairly more than 109,000 customers in financial difficulty.
The company, one of the UK’s biggest car finance firms, has agreed to pay more than £21.5m to compensate those consumers who may have suffered harm because of its failings. VW said it was contacting the affected customers.
The FCA said VW made difficult personal financial situations worse by failing to consider what customers might need. “It is right it compensates those who suffered. This fine and redress should send clear signals to lenders that they need to properly support those in financial difficulty,” the FCA said.
VWFS is one of the UK’s largest motor finance providers, and provides a range of products to help customers buy several well-known motor brands, including Volkswagen, Skoda and Porsche.
An FCA investigation found that it failed to treat fairly customers in financial difficulty and communicate information to them in a clear and fair way, if they fell behind on their repayments.
The watchdog found the company exacerbated “stress and anxiety for customers who were already struggling with their mental well-being” as well as failing to understand the impact of individual customer circumstances that followed from their cars being taken away.
In one instance, a customer said their difficulties were so bad they had recently attempted suicide. Despite this, they received no empathy, but were “sarcastically” reminded how many days are in a month by VWFS’s agents, the FCS says.
In a second case, a customer took out car finance but later could not afford the repayments. They were told it would cost them £20,000 to give the car back.
VWFS failed to grant customers time to repay arrears even where they had presented reasonable offers to do so. Until September 2022, customers were charged a £232, repossession fee irrespective of their circumstances.
The FCA found extensive evidence of poor customer services, with VW staff displaying a lack of empathy and professionalism during telephone calls with customers, including repeatedly and sarcastically referring to a customer as a “delight”; falsely stating that direct debits could not be changed; laughing inappropriately when making mistakes; sighing; not
acknowledging customer frustration; and not offering an apology when it would clearly have been reasonable to do so, such as for long wait times.
It also found that advisers provided customers with incorrect or incomplete information during telephone calls, including on arrears balances, settlement figures and credit file impact.
Therese Chambers, the FCA’s joint executive director of enforcement and market oversight, said: “For many, a car is not a nice 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. This fine and redress should send clear signals to lenders that they need to properly support those in financial difficulty.”
The FCA has previously fined HSBC, Barclays, Lloyds and the TSB for failures in how they treated customers in financial difficulty. It said VWFS would have been fined £7.7m but qualified for a 30 per cent discount by agreeing to resolve the cases.
VWFS 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.”
