The Financial Conduct Authority (FCA) has fined Volkswagen Financial Services UK £5.4m for failing to treat customers fairly from January 2017 to July 2023.

The regulatory body highlighted that the company’s practices had a detrimental impact on financially vulnerable customers, including the repossession of vehicles without considering alternative solutions.

Volkswagen Financial Services UK has agreed to compensate affected customers, with a redress package totalling over £21.5m for approximately 110,000 individuals.

This move comes as the company acknowledges the potential harm caused to customers who may have been overly reliant on their vehicles for essential travel, such as commuting to work.

FCA Enforcement and Market Oversight joint executive director 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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The FCA’s enforcement action follows supervisory work aimed at evaluating how lenders support borrowers facing financial challenges.

Customers affected by Volkswagen Finance’s failings will be contacted directly regarding the redress scheme, with no immediate action required on their part until they are approached by the company.

The investigation into Volkswagen Finance’s practices took 13 months to complete, culminating in the discovery of significant failings exacerbated by inadequate and automated communication processes.

In September, Volkswagen Group announced the termination of labour agreements in Germany, a decision that could lead to job reductions at six German plants.

Reports indicate that the company has informed the IG Metall union of its intention to cancel several labour agreements, including one that secures jobs at these plants until 2029.