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- The company was also fined £5.4 million for how it handled the issue.
Volkswagen Finance will pay loan customers £21.5m after the City regulator fined it £5.4m for unfair treatment of drivers in financial difficulty.
The Financial Conduct Authority (FCA) said Volkswagen Finance agreed to pay compensation to around 110,000 affected customers after a regulatory investigation.
Volkswagen Finance offers loans to customers to purchase cars from a variety of well-known motor brands, including Volkswagen, Skoda and Porsche.
Volkswagen Finance removed cars from vulnerable loan customers between January 1, 2017 and July 31, 2023 without exploring other options, the FCA said.
Complex operation: Volkswagen Financial Services is the financial arm of Volkswagen UK and operates as Volkswagen Finance, selling finance, insurance, warranties and service plans.
This meant that many customers were left worse off, especially if they needed their car for work or commuting.
In one case seen by the FCA, a customer who was going through a divorce and anxiety said dealing with Volkswagen Finance was “making things worse”.
The customer subsequently attempted suicide and Volkswagen Finance continued to send correspondence that it considered threatening despite knowing about it.
The regulator added that Volkswagen Finance did not understand the individual circumstances of many customers in difficulty or provide personalized support.
Volkswagen Finance has improved the training of its staff and the way it collects debts.
The lender’s original fine of £7.7m was reduced by 30 per cent as it agreed to put things right.
The FCA has been carrying out a review of how lenders support customers when they get into difficulties.
It has investigated almost 100 lenders in the last four years and obtained more than £65 million in compensation for more than 320,000 customers.
Therese Chambers, joint executive director of compliance and market oversight at the FCA, said: “For many, owning a car is not a nice-to-have, but a necessity for work or family life.
‘Volkswagen Finance made difficult personal situations worse by failing to consider what those in difficulty might need.
‘It is fair that I compensate those who suffered. This fine and compensation should send clear signals to lenders that they need to adequately support those in financial difficulty.’
A Volkswagen Finance spokesperson said: ‘We recognize our shortcomings in these past cases and have made significant adjustments over recent years to ensure we are always providing the correct level of service.
“We are in the process of concluding our remediation efforts while continuing to provide goodwill payments to affected customers and apologize for any harm caused.”
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