Volkswagen has been ordered to pay £21.5 million ($27.9 million) in compensation, alongside a £5.4 million ($7 million) fine, for failing to treat financially struggling customers fairly, including repossessing cars from individuals who had attempted suicide or were caring for sick relatives.
The UK Financial Conduct Authority (FCA) reported that 110,000 customers were negatively affected by the actions of Volkswagen Financial Services (VWFS), a subsidiary of the German carmaker. Most new cars in the UK are purchased through finance agreements, often provided by captive lenders owned by carmakers like Volkswagen, Ford, and Stellantis. In 2023, VWFS made £276 million ($358 million) in profit, financing 400,000 vehicles worth over £10 billion ($12.9 billion).
However, the FCA investigation revealed multiple failures in VWFS’s treatment of customers facing financial hardship between 2017 and July 2023, including during the Covid-19 pandemic and the cost of living crisis. Under UK consumer laws, lenders are required to treat struggling customers fairly, but VWFS actions exacerbated the stress and anxiety of vulnerable individuals. In some cases, cars were repossessed from people who relied on them for work.
In one incident, a customer who had attempted suicide due to financial struggles received a threatening letter from VWFS just two weeks after the attempt. The company also showed a lack of empathy in customer communications, with agents being unhelpful and dismissive. In another case, a customer seeking assistance while dealing with a divorce and caring for a relative with cancer received no meaningful response from the company.
Volkswagen avoided a higher £7.7 million fine by cooperating with the FCA’s investigation and implementing a new debt-collection model. Therese Chambers, FCA joint executive director, stressed that a car is a necessity for many people, and VWFS made difficult situations worse by not providing proper support to those in need.
A spokesperson for VWFS acknowledged past shortcomings, noting that significant changes have been made to improve service levels. The company is concluding its remediation efforts, issuing goodwill payments to affected customers, and offering an apology for any harm caused.
