Volkswagen fined $5.4 million for abusing vulnerable UK car finance customers | Volkswagen (VW)

Volkswagen had to pay $21.5 million in compensation to customers, in addition to a $5.4 million fine, for failing to treat struggling customers fairly, including impounding the vehicles of people who had attempted suicide or were caring for sick relatives.

Britain's financial regulator, the Financial Conduct Authority (FCA), said 110,000 customers had been harmed by unfair practices by Volkswagen Financial Services (VWFS), which is wholly owned by the German car manufacturer.

The majority of new cars in the UK are purchased with some form of finance, many of which are provided through captive companies owned by car manufacturers.

Owned by companies such as Ford, Stellantis and Volkswagen, these companies are major lenders in the UK and tend to be very profitable. VWFS provides finance to the entire Volkswagen Group, which includes Audi, Skoda and Porsche, with revenues of 276 million in 2023, financing 400,000 vehicles worth more than 10 billion a year. We provided funding.

But the FCA detailed VWFS' failures after investigating its treatment of customers in financial hardship. The measures cover the period from 2017 to July 2023, including the COVID-19 pandemic and the resulting cost-of-living crisis, when many households suffered severe financial hardship through no fault of their own.

The FCA is also investigating separate complaints that car dealers were overcharging customers.

Under UK consumer law, lenders have a duty to treat customers fairly when they say they are struggling to repay. But VW's actions included adding to the stress and anxiety of customers already struggling with mental health issues and taking cars away from people who depend on them for work.

In one example, a parent told the company that stress and financial difficulties, in addition to a fight over child custody, led the client to attempt suicide. He said Volkswagen's treatment was making the situation worse, including sending threatening letters two weeks after the suicide attempt.

Agents demonstrated a lack of empathy in phone communications, including one who cynically reminded customers of the number of days in a month and another who referred them to departments that could not help. The company only acknowledged he was vulnerable after pursuing him for 11 months.

Another client asked for breathing space as she cared for a relative with cancer while going through a divorce and self-isolating during the pandemic. VWFS did not engage with the emails in any material way, the FCA said.

VWFS avoided a higher fine of £7.7m by cooperating with the investigation. We also implemented a new debt recovery model.

Therese Chambers, joint managing director of FCA, said that for many people a car is not just a nice thing to own, but a necessity for work or family life.

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Volkswagen Finance made difficult personal situations worse by failing to consider the needs of those in need, she said. It is right to compensate those who have suffered. These fines and corrective actions should send a clear signal that lenders must adequately support those in financial hardship.

A VWFS spokesperson said: We recognize the shortcomings of past practice and have made significant adjustments in recent years to ensure we always provide an appropriate level of service.

We are in the process of concluding our redress efforts by continuing to provide good faith compensation to affected customers and apologizing for the harm caused.

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