The Financial Conduct Authority (FCA) has fined Volkswagen Financial Services UK £5.9m for failing to treat its customers in financial difficulty fairly.

The firm has agreed to pay over £21.5m in redress to around 110,000 customers who may have been harmed because of its failings.

The regulator found that between January 2017 and July 2023, Volkswagen Finance "failed to understand customers’ individual circumstances" or provide tailored support for their needs.

As a result of the failings, the firm took cars from vulnerable customers without considering other options, putting people at risk of being in a worse position, particularly if they relied on their car to travel to work.

The FCA said that the failings were "compounded by poor templated and automated communications".

Alongside setting up the redress scheme, Volkswagen Finance has also made improvements to its training for customer service staff and communications and introduced a new debt collections model.

The firm was set to be fined £7.7m but it agreed to resolve the issues uncovered by the investigation, so qualified for the FCA’s 30% discount.

Joint executive director of enforcement and market oversight at the FCA, 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."

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