Volkswagen Finance to pay £21 MILLION to drivers for unfair remedy

Volkswagen Finance will pay loan customers £21.5million after the city regulator fined it £5.4million for unfair treatment of drivers in financial difficulty.

The Financial Conduct Authority (FCA) said Volkswagen Finance agreed to pay the compensation to around 110,000 affected customers after a regulatory probe. 

Volkswagen Finance offers loans to customers to buy cars across a range of well-known motor brands, including Volkswagen, Skoda and Porsche.

Volkswagen Finance took cars away from vulnerable loan customers between 1 January 2017 and 31 July 2023 without exploring other options, the FCA said.

Complex operation: Volkswagen Financial Services is Volkswagen UK’s financial arm and trades as Volkswagen Finance, selling finance, insurance, warranties and service plans

This meant many customers were left worse off, particularly if they needed their car for work or commuting.

In one case seen by the FCA, a customer going through divorce and anxiety said dealing with Volkswagen Finance was ‘making matters worse’.

The customer then attempted suicide, and Volkswagen Finance carried on sending correspondence he considered threatening despite knowing this.

The regulator added that Volkswagen Finance did not understand many distressed customers’ individual circumstances or give tailored support.

Volkswagen Finance has now improved its staff training and how it collects debts.

The lender’s original fine of £7.7million was reduced by 30 per cent due to it agreeing to make matters right.

The FCA has been carrying out a review of how lenders support customers when they run into difficulty.

It has looked into almost 100 lenders in the past four years, and secured more than £65million of compensation for more than 320,000 customers.

FCA joint executive director of enforcement and market oversight Therese Chambers 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.’

A Volkswagen Finance spokesman 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.’