FCA Fines Volkswagen Financial Services UK £5.4 Million for Mistreating Customers in Financial Difficulty

The Financial Conduct Authority has fined Volkswagen Financial Services (UK) Limited £5,397,600 for a series of consumer credit regulatory breaches centred on the treatment of customers who fell into financial difficulty. The regulator confirmed the penalty on 21 October 2024.

VWFS UK, which provides finance for vehicles across the Volkswagen Group's brand portfolio, was found to have taken customers' cars away without assessing their circumstances, charged repossession costs regardless of those circumstances, failed to offer appropriate forbearance and failed to implement its arrears and vulnerability policies in practice. The combination of failings, the FCA said, left a cohort of borrowers worse off at precisely the moment they needed appropriate support.

FCA FINDINGS

Central to the regulator's findings was the treatment of vulnerable customers. The FCA determined that VWFS UK had not directed those customers to suitable assistance when they fell behind on payments, and charged repossession costs that may have compounded their financial difficulty. The FCA found that VWFS UK breached its Principles for Businesses on treating customers fairly, communicating clearly and management and control between January 2017 and July 2023, before the Consumer Duty took effect.

Although VWFS had arrears and vulnerability policies and adviser training in place, the FCA found it failed to implement them in practice: advisers did not adequately probe and record signs of vulnerability or explore customers' circumstances, and often rolled customers onto short-term payment arrangements they could not sustain.

PENALTY AND REDRESS

VWFS UK is also paying redress estimated at more than £21.5 million to around 110,000 affected customers.

The FCA indicated that the fine was calculated in accordance with its standard penalty-setting framework, which takes into account the seriousness of the breach, the firm's revenue from the relevant business area, and any mitigating or aggravating factors. VWFS UK agreed to settle and so qualified for a 30% discount, reducing the penalty from about £7.7 million to £5,397,600.