In a shocking revelation that has sent shockwaves through the automotive finance industry, Volkswagen Financial Services (VWFS) has been slapped with a hefty £5.4 million fine by the UK’s Financial Conduct Authority (FCA) for mistreating customers facing financial hardship. The German carmaker’s lending subsidiary has also been ordered to pay £21.5 million in compensation to the 110,000 customers who suffered detriment due to its unfair practices.
A Litany of Failures
The FCA’s investigation, which covered the period from 2017 to July 2023, uncovered a litany of failures by VWFS in its treatment of customers struggling to make repayments. This period encompassed both the Covid pandemic and the subsequent cost of living crisis, when many households faced severe financial difficulties through no fault of their own.
Under UK consumer laws, lenders have a duty to treat customers fairly when they disclose financial struggles. However, VWFS’s actions often had the opposite effect, exacerbating the stress and anxiety of customers already grappling with mental health issues. In some cases, the company even repossessed vehicles from people who relied on them for work or had recently attempted suicide.
Callous Treatment of Vulnerable Customers
One particularly egregious example involved a parent who informed VWFS of a suicide attempt due to stress, financial struggles, and a custody battle. Despite this, the company continued to send threatening letters and displayed a stark lack of empathy in phone communications. It took 11 months of chasing the customer for VWFS to finally acknowledge their vulnerable status.
Another customer, going through a divorce and self-isolating during the pandemic while caring for a relative with cancer, requested breathing space from the lender. VWFS failed to engage with this plea in any substantive way, disregarding the customer’s difficult circumstances.
The Human Cost of Corporate Greed
These stories paint a picture of a company more concerned with its bottom line than the well-being of its customers. VWFS, which provides finance across the Volkswagen Group brands, including Audi, Skoda, and Porsche, is a highly profitable enterprise. In 2023 alone, it made profits of £276 million while funding 400,000 vehicles worth more than £10 billion.
Yet, this financial success appears to have come at a human cost. As Therese Chambers, a joint executive director at the FCA, pointedly noted:
“For many people, a car is not a nice to have but a necessity for work or family life. Volkswagen Finance made tough personal situations worse by failing to consider what those in difficulty might need.”
Therese Chambers, FCA Joint Executive Director
A Wake-Up Call for the Industry
The substantial fine and redress order should serve as a wake-up call to other auto lenders, signaling the need to properly support customers in financial difficulty. The FCA’s action demonstrates that mistreatment of vulnerable consumers will not be tolerated, even from major players in the industry.
VWFS has acknowledged its shortcomings and claims to have made significant adjustments to its practices in recent years. A spokesperson stated:
“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.”
VWFS Spokesperson
While this admission is welcome, it remains to be seen whether the changes implemented will be sufficient to prevent future mistreatment of customers. The FCA’s findings suggest deep-rooted issues within VWFS’s corporate culture that may take significant time and effort to address.
Protecting the Vulnerable
This case also highlights the critical importance of robust consumer protection laws and proactive regulatory oversight. Without the FCA’s intervention, the unfair practices at VWFS may have continued unchecked, causing further harm to vulnerable individuals and families.
It is crucial that regulators remain vigilant in monitoring the conduct of financial institutions, particularly those dealing with essential goods like vehicles. Consumers facing financial hardship are often at their most vulnerable and require extra support and understanding from lenders.
The FCA’s action against VWFS sends a clear message that mistreatment of customers in difficulty will not be tolerated. It is now up to the industry as a whole to heed this warning and ensure that fair treatment of consumers is embedded into their corporate DNA.
As for the 110,000 customers who suffered detriment at the hands of VWFS, the compensation ordered by the FCA will provide some measure of redress. However, for many, the emotional and psychological scars inflicted by the company’s callous actions may take far longer to heal.
This case is a stark reminder of the human cost of corporate greed and the vital role that robust regulation plays in protecting the most vulnerable in our society. It is a wake-up call that the automotive finance industry cannot afford to ignore.
