FCA fines finance company over fair treatment

The FCA has fined Volkswagen Financial Services (UK) Limited over £5m in a package that also involves the firm in paying £21.5m redress to customers who may have suffered harm over the firm’s failure to treat fairly customers in financial difficulty in respect of car loans it had made. The FCA found the firm breached Principles 3, 6 and 7 of its Principles as well as various rules in CONC 7 in respect of forbearance, and in some cases DISP by failing to identify complaints and treat them appropriately.

The FCA found that, over a period of 6.5 years to July 2023, the firm did not understand customers’ individual circumstances or give them tailored support. At worst, this meant that it was taking cars away from vulnerable customers without considering alternatives – so compounding the problems of those that needed to drive to work. Its failure to deal fairly with customers in trouble was made worse by poor templated and automated communications that the customers received.

The problems came to light following FCA supervisory work which resulted in the firm commissioning a third party review of how it treated customers in financial difficulty. The FCA found that:

• the firm did not seek to identify or understand the nature of customers’ vulnerabilities and the tailored support they might need – and several customers said the firm’s actions caused them additional stress and upset.;
• there will little or no probing of individual circumstances to consider possible forbearance options and limited evidence of use of affordability assessments when the firm agreed alternative payment arrangements – which often resulted in short-term unsustainable payment arrangements as customers were either rolled into further arrangements they could not maintain either or just presented with voluntary termination or early settlement as options;
• the firm took away cars from customers who were vulnerable or in financial difficulties without assessing their circumstances and the forbearance options, and would not engage with customers wanting to discuss options. It also charged them for taking the cars away;
• the firm’s way of engaging with customers was through templated communications many of which did not provide a way for customers to engage on an informal basis – and often also referred to charges that the firm did not in fact impose;
• had the firm properly implemented its stated arrears and vulnerability policies and procedures, many of the failings would likely have been avoided.

The redress scheme will compensate affected customers, and the firm has also made improvements to its staff training and communications and has introduced a new debt collections model.