FINAL NOTICE

To:

Volkswagen Financial Services (UK) Limited

1
ACTION

1.1
For the reasons given in this Final Notice, the Authority hereby imposes on

Volkswagen Financial Services (UK) Limited (VWFS) a financial penalty of

£5,397,600 pursuant to section 206 of the Act.

1.2
VWFS agreed to resolve this matter and qualified for a 30% (stage 1) discount

under the Authority’s executive settlement procedures. Were it not for this

discount, the Authority would have imposed a financial penalty of £7,710,885.73

on VWFS.

2
SUMMARY OF REASONS

2.1
VWFS is one of the UK’s largest motor finance providers, offering finance to

customers to purchase cars across a range of well-known motor brands, including

Volkswagen, Skoda and Porsche.

2.2
Between 1 January 2017 and 31 July 2023 (the Relevant Period), in respect of

customers in financial difficulty, VWFS breached Principles 6, 7 and 3 of the

Authority’s Principles for Businesses (PRIN) by failing to (a) pay due regard to

the interests of those customers and treat them fairly, and the information needs

of those customers and communicate with them in a way that was clear, fair and

not misleading; and (b) take reasonable care to organise and control its affairs

responsibly and effectively. In addition, VWFS breached CONC 7.2.1R, 7.3.4R,

7.3.9R, 7.3.14R(1) from the Consumer Credit sourcebook (CONC) when failing to

treat customers in financial difficulty with forbearance and due consideration and

DISP 1.3.1R from the Dispute resolution: Complaints sourcebook (DISP) by

failing to identify some complaints and treat them as such.

2.3
VWFS identified at least 109,589 customers who suffered detriment, or were at

risk of suffering detriment, as a result of these failings. This included in some

instances (a) exacerbating stress and anxiety for customers who were already

struggling with their mental well-being; (b) failing to understand individual

customer circumstances resulting in cars being taken away from customers, some

of whom used their cars for work; (c) further distress and upset caused to

vulnerable customers who may have felt unsupported and unheard; and (d)

forgoing other priority payments due to demands to pay arrears on car finance.

VWFS has to date paid £17,823,500 in redress to these customers and estimates

that it will pay over £21,506,496 in total redress payments. VWFS only identified

the shortcomings in its treatment of customers in financial difficulty following

proactive supervision and file review work undertaken by the Authority as part of

the Borrowers in Financial Difficulty project. This prompted VWFS to commission

a third party review of its treatment of customers in financial difficulty.

2.4
During the Relevant Period, VWFS failed to treat customers in financial difficulty

fairly and communicate information to them clearly and fairly as follows:

2.4.1
Vulnerable customers: There was a lack of probing by VWFS to

understand the nature of customers’ vulnerabilities and any tailored

support which may be required. Some vulnerable customers stated

specifically that VWFS’s actions caused them additional distress and

upset. VWFS did not sufficiently identify, record and act upon

vulnerability indicators, which resulted in instances of vulnerable

customers having their agreements terminated and their car taken

away without VWFS taking account of any such vulnerabilities;

2.4.2
Forbearance and due consideration: There was limited or no

probing of individual circumstances to identify suitable forbearance

options and limited evidence of affordability assessments being used

when agreeing alternative payment arrangements. This meant VWFS

was unable to provide customers in financial difficulty with tailored

support that was sustainable, and indeed the arrangements offered by

VWFS were often not sustainable – predominantly taking the form of

short-term arrangements. Customers who had already failed to

maintain a previous arrangement were often caught in a cycle of

simply being rolled onto further arrangements that they were also

unable to maintain. Customers in financial difficulty were often merely

presented with early settlement or voluntary termination;

2.4.3
Termination and repossession: Customers in financial difficulty or

with vulnerabilities had their agreements terminated and cars taken

away without VWFS assessing their circumstances and an appropriate

range of forbearance options. VWFS made limited, if any, attempts to

call customers before taking their car away. When customers sought

to engage with VWFS at this point, VWFS would not entertain

forbearance. That included instances where customers had made

reasonable offers to repay arrears. VWFS charged customers the costs

of taking their car away irrespective of their circumstances and without

highlighting those costs to customers at the time of termination in a

consistent way. This may have compounded such customers’ financial

difficulty with little consideration of how these costs would be paid;

and

2.4.4
Customer communication: VWFS’s failure to engage customers in

financial difficulty appropriately was compounded by the fact that

VWFS’s main method for communicating with these customers was to

send templated communications throughout the collections process. A

substantial proportion of these communications did not sufficiently

enable customers to engage in the arrears process on an informed

basis, including by failing to support and encourage customers to make

contact for a positive conversation about resolving their situation.

Default Notices referred to “late payment interest”, when VWFS did

not in fact charge default interest or any other default charges. This

will likely have added to customers’ distress and confusion. Further,

VWFS failed to identify some customer complaints and treat them as

such.

2.5
Further, VWFS failed to implement arrears and vulnerability policies and

procedures which would otherwise have likely avoided the extent of the above

failings. Consequently, VWFS failed to take reasonable care to organise and

control its affairs responsibly and effectively in practice, with adequate risk

management systems.

2.6
In order to pay due regard to the interests of customers, firms must take adequate

measures to properly understand the customer’s individual circumstances,

including their short-term and long-term financial positions and whether they may

be vulnerable owing to factors such as relationship breakdown, unemployment,

bereavement, disability, illness or caring responsibilities.

2.7
In order to pay due regard to the information needs of customers in financial

difficulty, firms should enable customers to engage in the arrears process on an

informed basis by: (a) using a range of communication channels such that

customers are able to readily access the help and support they need; (b) setting

the right tone in these communications by explaining the benefits of engaging

early when at risk of or in financial difficulty and emphasising the support the firm

can provide; and (c) enabling all customers including those who may be more

vulnerable to discuss their needs and responding flexibly to these needs and

circumstances.

2.8
Having taken those measures, firms should ensure that any forbearance agreed

is appropriately tailored to the customer’s individual circumstances by:

2.8.1
considering and taking account of both current and expected financial

and personal circumstances including any indicators of vulnerability;

2.8.2
offering a range of options to support customers to repay arrears, and

not merely arrangements to repay;

2.8.3
only putting in place arrangements to pay that are sustainable and

regularly monitoring and reviewing those arrangements; and

2.8.4
where fees and charges are levied on customers in financial difficulty,

ensuring those fees and charges are fair and clearly explained.

2.9
Failure to understand a customer’s individual circumstances and offer appropriate

solutions is likely to result in poor experiences or outcomes for the affected

customer. That is particularly so in the case of car finance, where inappropriate

solutions that worsen the customer’s financial situation could lead to their car

being taken away – a step which may compound financial difficulties for customers

who may rely on their car to travel to and from work or indeed use their car for

work, or who may forgo other priority payments (such as mortgage, rent, utilities

or food) due to demands to pay arrears on car finance.

2.10
The Authority considers VWFS’s failings to be particularly serious given that the

breach (a) must have caused a significant loss or risk of loss to individual

consumers; and (b) revealed serious and systemic weaknesses in the

implementation of the firm’s policies and procedures relating to its treatment of

customers in financial difficulty – noting in particular:

2.10.1
the aspects of VWFS’s breach that specifically impacted individual

vulnerable consumers were particularly serious;

2.10.2
VWFS's communication failings were compounded by deficient

standard templated and automated arrears correspondence; and

2.10.3
all of VWFS’s customers who (a) entered into regulated agreements

covered by VWFS’s Collections and Recoveries Department; and (b)

whose arrears persisted beyond the grace period – namely, 155,070

customers – were at risk of receiving poor experiences or outcomes

throughout the Relevant Period.

2.11
The Authority therefore hereby imposes on VWFS a financial penalty of

£5,397,600 pursuant to section 206 of the Act.

2.12
In this Notice, the Authority makes no criticism of any person other than VWFS.

2.13
The three focused case studies in this Notice use random letters to refer to each
of the anonymised customers.

3
DEFINITIONS

3.1
The following definitions are used in this Notice:

“the Act” means the Financial Services and Markets Act 2000

“Advisers” means those working in Collections as customer advisers

“ATP” means arrangement to pay

“the Authority” means the Financial Conduct Authority

“BiFD” means the Authority’s Borrowers in Financial Difficulty project

“BiFD File Review” means the Authority’s file review of a sample of VWFS customer

files, conducted as part of BiFD

“BiFD Feedback” means the August 2022 feedback provided by the Authority to

VWFS as to the BiFD File Review

“CD” means the anonymised customer in second case study in this Notice

“Collections” means VWFS’s Collections and Recoveries Department

“Collections Journey” means VWFS’s policies and procedures as to its treatment

of arrears customers

“CONC” means the Authority’s Consumer Credit sourcebook

“Consultancy File Review” means the Consultancy Firm’s file review of 100 arrears

customer end-to-end journeys

“Consultancy Firm” means the expert firm of consultants commissioned by VWFS

as part of the Past Business Review’s external work

“Default Notice” means a default notice issued by Collections

“DISP” means the Authority’s Dispute resolution: Complaints sourcebook

“Email Templates” means manually created emails based on templates

“JB” means the anonymised customer in third case study in this Notice

“Letter Templates” means automated letters based on templates

“Past Business Review” means the review undertaken by VWFS following the BiFD

“Pre-Termination Checklist” means the checklist to be completed by Collections

before termination

“PRIN” means the Authority’s Principles for Businesses

“Principle” means one of the Principles in the Authority’s Principles for Businesses

“Relevant Period” means 1 January 2017 to 31 July 2023

“Redress Scheme” means VWFS’s redress scheme

“Remediation Scheme” means VWFS’s remediation scheme

“TD” means the anonymised customer in first case study in this Notice

“the Tribunal” means the Upper Tribunal (Tax and Chancery Chamber)

“VWFS” means Volkswagen Financial Services (UK) Limited

4
FACTS AND MATTERS

4.1
Between 1 January 2017 and 31 July 2023 (the Relevant Period), VWFS was

one of the largest motor finance providers in the UK. VWFS used multiple trading

names, many of which are associated with well-known motor brands including:

4.1.1
Audi;

4.1.2
Bentley;

4.1.3
Lamborghini;

4.1.4
Porsche;

4.1.5
SEAT;

4.1.6
Skoda; and

4.1.7
Volkswagen.

4.2
During the Relevant Period, VWFS was authorised by the Authority to carry on the

regulated activities of (a) entering into a regulated credit agreement as lender;

and (b) entering into a regulated consumer hire agreement as owner. Over the

Relevant Period, VWFS’s regulated motor finance retail portfolio comprised

approximately 2.8 million accounts with a total book value of approximately £55.5

billion. Whilst a small percentage of customers fell into arrears (around 1.6% on

average across the product range), this still constituted a significant number of

customers given the overall size of the book.

4.3
VWFS divided its motor finance products between:

4.3.1
“purchase products”, which were typically consumer credit agreements

by which VWFS provided credit to the customer to facilitate the

purchase of a vehicle; and

4.3.2
“leasing products”, which were typically consumer hire agreements

that enabled the customer to use a vehicle without taking any steps to

purchase it.

4.4
VWFS’s products – and the vehicles with which they were associated – were stated

to be designed to support customers with a variety of needs. They generally

sought to be flexible to suit different monthly budgets, for example, by flexing up

or down the deposit and term. This meant VWFS’s customer base covered a wide

range of financial situations, including differences in customers’ ability to cope

financially with changes, for example, to household income and expenditure.

4.5
VWFS understood arrears customers to mean:

4.5.1
those who were experiencing financial difficulty as regards their ability

to maintain their contractual motor finance payments or shortfall

balance; and

4.5.2
those who had indicated they were about to do so.

4.6
Taking account of the risk that breaches would affect vulnerable customers, as a

substantial proportion of arrears customers may be vulnerable to some degree

owing to their financial circumstances, VWFS needed to be particularly mindful of

the need to:

4.6.1
provide arrears customers with an appropriate level of care and

support, taking account of the specific needs and circumstances of

vulnerable customers;

4.6.2
explore arrears customers’ circumstances adequately, and then offer

appropriate tailored forbearance that is in their interests and takes

account of their individual circumstances; and

4.6.3
ensure that its communications with arrears customers were clear, fair

and not misleading.

B.
How did VWFS say it would treat its arrears customers?

4.7
VWFS had a detailed set of policies and procedures as to its treatment of arrears

customers (the Collections Journey). These materials sought to ensure VWFS

complied with the Authority’s guidance and rules, with “specific regard” being paid

to Principle 6 of PRIN and chapter 7 of CONC.

4.8
The Collections Journey articulated VWFS’s overall aim in the following way:

“…to treat customers with respect, in a calm and professional manner, and

demonstrating an empathetic and flexible approach. All customers are

individuals, with potentially unique circumstances, which will be taken into

consideration when determining the appropriate action taken which ensures

fair customer outcomes.”

4.9
Accordingly, the Collections Journey was said to be designed to ensure that

arrears customers were:

4.9.1
treated fairly, reasonably and responsibly; and

4.9.2
clearly informed with matters having been dealt with in a timely

manner.

Vulnerable customers – particular care

4.10
The Collections Journey stated that the fair treatment of all customers, including

vulnerable customers, was central to VWFS’s culture. However, it emphasised the

need to take particular care to ensure vulnerable customers were treated fairly,

and that it was essential to recognise vulnerability.

4.11
In doing so, the Collections Journey recognised that vulnerable customers were

more likely to experience harm and, where there is actual harm, the impact is

likely to be greater than other customers.

4.12
To identify vulnerability, VWFS’s Collections and Recoveries Department

(Collections) was guided to use a combination of: (a) proactive monitoring of

data and management information (for example, customer transactions); and (b)

interactions with customers. In providing a summary of the data points,

interactions, phrases and documents which may indicate vulnerability, the

Collections Journey recognised that:

4.12.1
discussing vulnerable customers’ personal circumstances and needs

could be sensitive and it was important to show care and

understanding; and

4.12.2
vulnerable customers’ needs varied and it would not always be clear

as to how vulnerability could affect their relationship with VWFS. Those

working in Collections as customer advisers (Advisers) were guided

to engage with customers to seek relevant information to understand

their vulnerability.

4.13
Upon identifying vulnerability, the Collections Journey required VWFS to consider

how such vulnerability could affect the customer experience or outcomes. This

would ensure that VWFS’s approach was adapted in line with specific procedures.

Further, the Collections Journey made provision for recording this information on

VWFS’s systems.

4.14
From around October 2019 onwards, upon suspicion of potential vulnerability,

Advisers were required to follow additional specific procedures to (amongst other

things) determine the nature and severity of the vulnerability and capture

necessary information from the customer. These procedures made provision for

the use of vulnerability system flags. These flags would affect the collections

strategy for the account, such that (a) forbearance could be tailored to the period

of time VWFS expected the customer to be vulnerable; (b) the customer would

be handled by the specialist team within Collections dealing with vulnerable

customers as appropriate; and (c) appropriate communications could be sent to

the customer to support the forbearance option most suitable for them.

Collections

4.15
Collections consisted of teams of Advisers, including the specialist team that

provided assistance in dealing with cases of vulnerable customers.

4.16
Advisers were supported by team leaders through regular feedback and coaching,

continuous learning, training and quality assurance. Advisers’ training covered

topics such as “active listening”, “open questioning”, “understanding our

customer” and “vulnerable customers”.

4.17
The function of Collections was to provide front-line professional support to

arrears customers who were experiencing, or had indicated that they were about

to experience, financial difficulty which was, or would be, adversely impacting

their ability to make their contractual payments. Collections would work with

arrears customers to identify and implement solutions that were designed around

the customer’s personal and financial circumstances, to enable those customers

to retain their vehicle where feasible.

Missed payment

4.18
Upon a payment being missed or a customer’s account falling into arrears (a

situation described by Collections as “delinquent”), Collections’ strategy included

sending automated non-tailored communications, and to continue doing so until

the arrears had been cleared or further action had been taken to recover the debt.

Accounting for a 15-day grace period, these communications comprised:

a)
letters (Letter Templates), which varied in content depending

on how many days (namely, 31 days or less, 32 days to 61 days

and 62 days or over) had passed since the missed payment or

arrears. Some of these letters may have included wording

mandated by the Consumer Credit Act 1974; and

b)
text messages.

4.19
For manually created communications, Advisers were guided to use a suite of

email templates covering key aspects of the Collections Journey (Email

Templates).

4.20
Collections was directed to progress the account until all options – which were

said to be “dictated” by the customer’s individual circumstances – had been

exhausted. This involved taking reasonable steps to contact the customer to

discuss their circumstances and to seek a mutually agreed solution.

4.21
If Collections had still been unable to contact the customer, and the customer had

been in arrears for around two months, Collections would issue a default notice

(Default Notice). The Default Notice would give the customer a fixed period of

time to clear the outstanding arrears or come to an arrangement or make contact.

Termination

4.22
Where a Default Notice had expired, arrangements could still be agreed. However,

if there was still no customer contact or if such arrangements had still not been

agreed, Collections could then terminate the account and commence repossession

of the vehicle. Before taking this step, which was described by the Collections

Journey as a last resort when all other reasonable options had failed, VWFS

needed to complete a pre-termination checklist (the Pre-Termination

Checklist). The Pre-Termination Checklist included a requirement that an

outbound customer call had been attempted in the preceding 30 days.

Repossession

4.23
VWFS would then instruct repossession agents to seek recovery of the vehicle or

take full settlement of the liability, including the repossession costs in the event

of a repossession (although in practice such costs were not always charged,

including where repossession did not in fact occur). Repossession agents were

said to have been given “autonomy” to deliver appropriate outcomes based on

the customer’s individual circumstances. Where customers explained they were

developing a repayment plan, the agent was said to have been directed to make

clear that VWFS was willing to consider their proposal. VWFS expected

repossession agents to provide the customer with an explanation of repossession

fees.

Exploring customer circumstances

4.24
Throughout this process, Collections was required to “always” look to understand

a customer’s circumstances and the reasons they were experiencing financial

difficulties and take account of the same. Indeed, the Collections Journey provided

that understanding customers’ circumstances was “integral” to VWFS’s ability to

deliver fair customer outcomes.

4.25
When contact was made with an arrears customer, Advisers were guided to:

4.25.1
use probing questions to (a) establish the reasons for the missed

payments and whether the issues were short or long term; and (b)

determine what options could be presented to the customer to allow

them to decide the “best outcome” for their circumstances;

4.25.2
consider example pre-set questions to assist in understanding the

customer’s circumstances, including:

a)
the cause of the arrears, such as unemployment, bereavement,

an unexpected bill, ill health or a reduction in income (and its

temporary or permanent nature); and

b)
whether the customer had made proposals to clear the arrears,

and whether any such proposals were affordable.

4.26
Moreover, Advisers were required to understand the financial impact on the

customer to ensure an appropriate outcome. It was not acceptable to VWFS for

Advisers to merely understand the reason for the arrears. Advisers were required

to ask further questions to understand: (a) why the arrears were incurred; (b)

the customer’s current financial circumstances; and (c) what future impact those

circumstances will have on the customer.

Affordability assessments

4.27
The Collections Journey described affordability assessments as a useful tool in

understanding the customers’ difficulties in meeting their monthly payments. It

explained that, as a responsible lender, VWFS must calculate the affordability and

sustainability of repayment plans, and to achieve this, Collections would ask the

customer questions to understand their circumstances and use affordability

assessments where applicable. In this context, the reference to “repayment plans”

included:

4.27.1
an arrangement to pay (ATP), which was an arrangement for a period

of time to take additional payments to clear any outstanding arrears

due contractually under the agreement; and

4.27.2
a promise to pay, which was an agreement for a customer to pay a set

amount of money on a set date to clear an outstanding balance.

4.28
As to when Advisers were required to use affordability assessments during the

Relevant Period, the Collections Journey noted that this step was not a pre-

requisite for setting up an ATP. However, the Collections Journey directed Advisers

to use affordability assessments:

4.28.1
in all cases, where possible, from around July 2023 onwards where

forbearance options were being discussed;

4.28.2
in some cases prior to around July 2023 (noting that the trigger for

using affordability assessments varied during this period), such as:

a)
where the Adviser had any concerns relating to the affordability

of a proposed arrangement, for example where they had

observed trigger words or phrases such as “I can’t pay”, “I’m

having trouble paying” and “I am worried”;

b)
where a vulnerability flag had been raised on the account;

c)
where an existing affordability assessment had been completed

in the last six months and the customer’s situation had

changed; and

d)
where a customer had previously agreed to an ATP and this

arrangement had been broken due to the customer not being

able to maintain payments, an affordability assessment would

be required where:

i.
the customer had not completed an assessment

previously; or

ii.
where the customer had previously completed an

assessment and their financial situation had changed.

4.29
The affordability assessment covered priority debts such as rent, mortgage,

essential living expenses and other creditors (i.e. non-priority debts). Upon

completion, the Adviser would be guided as to what action to take depending on

the level of any disposable income.

4.30
In cases where an affordability assessment had not been completed (for example,

where the customer declined to do so), the Collections Journey:

4.30.1
required Advisers to nevertheless probe the customer around other

priority debts, so as to assess whether any offer of payment was

proportionate to their other priority debts and was not putting the

customer into further financial difficulty or pressuring them into an

unsustainable option; and

4.30.2
in the context of ATPs, guided Advisers to ask the customer what they

thought was affordable and negotiate from there based on appropriate

questioning and understanding of the customer’s circumstances.

Offering forbearance options

4.31
Once Collections had adequately explored and understood the customer’s

circumstances, Collections needed to identify forbearance options. This included,

wherever possible, identifying affordable arrangements and providing reasonable

time and opportunity to repay where required. In doing so, the Collections Journey

required Collections to (amongst other things):

4.31.1
treat the customer positively, empathetically and with forbearance;

4.31.2
take a proactive approach to supporting vulnerable customers;

4.31.3
“always” look to work with the customer to tailor arrangements

according to their financial circumstances. Advisers were directed to

be flexible to allow for alternative and affordable repayments; and

4.31.4
provide breathing space to allow the customer to explore their options,

during which Collections’ activity was generally suspended.

4.32
Depending on the customer’s individual circumstances, a range of forbearance

options may have been available, and could have included:

4.32.1
an ATP or a promise to pay;

4.32.2
the sale or part exchange of the vehicle;

4.32.3
the customer exercising their right to voluntarily terminate the

agreement, which may have involved returning the vehicle voluntarily.

However, for purchase products, as the vehicle may – owing to

depreciation – have been worth less than the final repayment value at

the end of the agreement, the customer could still have had a shortfall

balance upon return of the vehicle; and

4.32.4
in certain cases, including those involving vulnerable customers,

writing off any arrears.

4.33
Once an agreement had been terminated, settlement or recovery of the vehicle

were the only possible options – save for leasing products, in which case, recovery

of the vehicle was the only option.

4.34
Advisers had the discretion to agree to ATPs of 12 months or less. All ATPs longer

than 12 months – which in some cases was possible in cases of long term

vulnerability – needed to have been authorised by a team manager.

4.35
Once an ATP had been set up, the Collections Journey provided for Collections to

proactively write to the customer after around two months to invite them to make

contact if the ATP was no longer affordable or sustainable.

4.36
Where an ATP payment was missed, the Collections Journey emphasised the

importance of assessing the customer’s current circumstances to consider their

best option.

4.37
For previously broken ATPs, Advisers were required to understand why the

customer had failed to meet the ATP. In cases of continuously broken ATPs,

Advisers were guided to explore all forbearance options with the customer to

provide them with all possible support to make the “best informed” decision.

C.
How did VWFS actually treat its arrears customers?

4.38
From September 2022, VWFS underwent a review as regards its treatment of

arrears customers (the Past Business Review). The Past Business Review

painted a markedly different picture from the one presented by the Collections

Journey.

4.39
The Past Business Review came about as a consequence of proactive supervision

by the Authority. In summary:

The Borrowers in Financial Difficulty (BiFD) project

4.39.1
the Authority initiated BiFD in March 2021, a programme of work

aimed at ensuring firms were meeting their obligations and guidance

which set out the Authority’s additional expectations for the treatment

of borrowers in financial difficulty. The firms within BiFD’s scope

covered a range of different retail lending sectors including motor

finance;

4.39.2
as part of BiFD’s work, the Authority required VWFS (amongst other

firms) to provide a representative sample of individual customer files

for review by the Authority (the BiFD File Review). The aim of the

BiFD File Review was to assess whether the outcomes customers had

received were fair and appropriate;

BiFD Feedback

4.39.3
in August 2022, the Authority provided VWFS with feedback as to the

BiFD File Review (the BiFD Feedback). The BiFD Feedback:

a)
highlighted a number of observations, which were said to be

serious issues that impacted the entire Collections Journey,

including as to:

i.
the lack of effective conversations with customers to

probe and understand their circumstances;

ii.
the limited use of a range of forbearance options with a

focus
on
customer-led,
short-term
payment

arrangements;

iii.
premature repossessions having not explored all

options;

iv.
how
the
particular
needs
and
circumstances
of

vulnerable customers were taken into account;

v.
how VWFS encouraged customers to engage with it and

the content and tone of some communications;

b)
noted that the extent of those issues suggested that customers

had been – and were still – at risk of harm, both financially and

through distress and inconvenience;

c)
sought a response from VWFS, including as to its plans for

improvement and any immediate action to mitigate the risk of

harm to customers. Specifically, the feedback noted that

VWFS’s approach to repossession was a particular concern, and

asked VWFS to consider whether it was appropriate to continue

enforcing repossessions; and

VWFS’s response to the BiFD Feedback

4.39.4
in response, VWFS informed the Authority that it (amongst other

things):

a)
had paused all repossession and litigation activity; and

b)
would commence the Past Business Review, which involved an

extensive programme of external and internal work.

4.40
As part of the Past Business Review’s external work, VWFS commissioned an

expert firm of consultants (the Consultancy Firm) to conduct work that included

independent reviews of broader samples of customer files.

4.41
This work involved the Consultancy Firm reviewing a random sample of 100 end-

to-end arrears customer journeys (the Consultancy File Review).

4.42
The Consultancy File Review’s objectives included:

4.42.1
understanding the extent to which the observations identified by the

BiFD File Review were widespread;

4.42.2
analysing the root causes of the issues; and

4.42.3
enabling VWFS to quantify any customer harm for the purposes of

redress as part of VWFS’s remediation scheme (the Remediation

Scheme).

4.43
The Consultancy Firm provided case reviewers with a “case assessment

methodology”, which involved:

4.43.1
a detailed checklist that included questions aligned to the BiFD File

Review’s observations; and

4.43.2
guidance on key regulatory expectations and relevant aspects of the

Collections Journey aligned to the BiFD File Review’s observations .

This guidance made specific reference to Principles 6 and 7, chapter 7

of CONC and DISP.

4.44
Case reviewers were required to work through that methodology when

documenting their assessment, including by completing the checklist.

4.45
For the purpose of their assessment, case reviewers would:

4.45.1
determine whether the outcome was: (a) unfair; (b) “fair with

learnings”; or (c) fair; and

4.45.2
for unfair outcome cases, provide any indication of actual or potential

customer harm, with examples covering: (a) financial harm (for

example in relation to repossession fees); and (b) non-financial harm

(for example vulnerable customers not being identified and evidence

of inappropriate or unsuitable follow up).

4.46
The Authority has examined the Consultancy File Review and has determined that

it was carried out with reasonable accuracy in accordance with its stated

objectives. VWFS promptly accepted the Consultancy Firm’s findings.

4.47
In respect of the substance as to how VWFS treated its arrears customers, the

Authority considers that both “unfair” outcome cases and “fair with learnings”

outcome cases involved unfair treatment of customers. That is not least because

both these categories included adverse departures from the Collections Journey,

with “learnings” covering “poor practice” and “poor customer experience”.

Accordingly, the Authority has used the terms:

4.47.1
“unfair treatment” when characterising cases resulting in both unfair

outcomes and “fair with learnings” outcomes; and

4.47.2
“fair treatment” when characterising cases resulting in fair outcomes.

4.48
The Consultancy File Review structured its observations around each of the areas

featured in the BiFD Feedback. The Consultancy File Review’s observations were

consistent with the key themes identified by the Authority in the BiFD Feedback.

The Consultancy File Review’s assessments were as follows:

Fair with

Percentage
of

sample

4.49
Based on the Authority’s view that both “unfair” outcome cases and “fair with

learnings” outcome cases involved unfair treatment of customers, it considers the

aggregation of the Consultancy File Review’s assessments to be as follows:

Percentage of sample

51%
49%

VWFS’s treatment of its arrears customers

4.50
Having regard to matters including the Consultancy Firm’s work, the Past Business

Review’s other internal and external work, and the Authority’s own analysis, the

Authority has focused its findings on the following areas:

4.50.1
the identification and treatment of vulnerable customers;

4.50.2
forbearance and due consideration, covering (a) the exploration of

customer circumstances; and (b) the range of forbearance options put

forward;

4.50.3
termination and repossessions; and

4.50.4
customer communications.

4.51
To assist in illustrating the Authority’s findings, this section features three

anonymised focused customer case studies, which appear in boxed text.

4.52
Although there is a degree of overlap (particularly as regards customer

communications), we take each of these areas in turn.

I.
Vulnerable customers

4.53
The Authority’s findings in relation to this issue are that, despite the Collections

Journey emphasising (a) the need to take particular care to ensure vulnerable

customers were treated fairly; (b) that it was “essential” to recognise

vulnerability; and (c) the need to take a proactive approach when supporting

vulnerable customers:

4.53.1
where customers presented indicators of vulnerability, there was a lack

of probing by Advisers to understand: (a) the nature of the

vulnerability; and (b) any tailored support which may be required.

Examples of such indicators included long term illness, mental health,

caring responsibilities, bereavement and divorce. This rendered

VWFS’s policies and procedures as regards vulnerable customers

materially ineffective. As Advisers had not identified vulnerability, they

were not in a position to consider how such vulnerability could affect

the customer experience or ensure that VWFS’s approach was adapted

in line with specific procedures. Advisers would have been required by

the Customer Journey to consider those matters had vulnerability been

identified;

4.53.2
generally, there was no evidence of vulnerability flags or records on

accounts other than by way of references in system notes to the

customer’s circumstances. The lack of vulnerability records rendered

VWFS’s ability to ensure vulnerable customers were provided with the

support required on each contact materially ineffective and therefore

undermined VWFS’s ability to ensure a fair outcome was achieved. For

example, the lack of vulnerability flags meant:

a)
Advisers did not have the benefit of it being highlighted to them

that the customer was in a vulnerable position;

b)
Advisers were not guided to use an affordability assessment

owing to that flag, which would have enabled VWFS to consider

the customer’s health and financial circumstances and find the

“fairest outcome”;

c)
VWFS could not ensure that appropriate communications were

sent to the customer to support the forbearance option most

suitable for them;

d)
Advisers were not guided to consider how forbearance could be

tailored to the period of time VWFS expected the customer to

be vulnerable, including “enhanced” forbearance options where

appropriate, such as writing off the outstanding balance;

e)
VWFS was not required to inform customers that a vulnerability

flag had been added to the account;

f)
the account was not required to be handled by the specialist

Collections team dealing with vulnerable customers;

4.53.3
customers presenting indicators of vulnerability stated specifically that

VWFS’s actions caused them additional distress and upset; and

4.53.4
accounts were progressed to termination and repossession despite the

customer presenting indicators of vulnerability in prior engagement

with VWFS. These accounts were not identified upon completion of the

Pre-Termination Checklist (which did not contain a checkbox regarding

vulnerability) despite such indicators appearing in system notes

instead of a vulnerability flag. This prevented such customers from

receiving appropriate contact and consideration in relation to VWFS’s

termination and repossession processes, which may in turn have led

to inappropriate termination and repossession action.

4.54
In order to pay due regard to the interests and information needs of arrears

customers, VWFS needed to (a) sufficiently probe and understand the

circumstances of arrears customers presenting indicators of vulnerability; and (b)

take account of any vulnerability indicators when considering any tailored support

that may be required, including as regards forbearance options and the

progression of any such customers to termination and repossession.

4.55
The Authority considers that VWFS’s conduct in relation to VWFS’s identification

and treatment of vulnerable customers to be particularly serious in light of

(amongst other things):

4.55.1
unfair treatment (based on the Authority’s aggregated assessment as

explained above) being evidenced in relation to 12 out of 13 cases

(around 92%), with vulnerability being identified as not applicable in

the remainder of the sample of 100 cases (the Consultancy Firm had

graded the vulnerability theme in relation to those 12 cases as unfair

in 6 cases and fair with learnings in 6 cases); and

4.55.2
VWFS’s cognisance that vulnerable customers were more likely to

experience harm and, where there is actual harm, the impact is likely

to be greater than other customers.

Case Study 1 – “You are speaking to a vulnerable customer and you’ve
not helped me.”

Over the course of 11 months, Customer TD (TD) presented to VWFS a host of
complex and worsening physical and mental health difficulties set against a
background of relationship breakdown, caring responsibilities and income
shock. This included:

a) attempt at suicide owing to stress and financial struggles;
b) ongoing divorce, including contested court proceedings in respect of

child contact;

c) acute anxiety, depression and very high blood pressure – conditions

exacerbated by stress; and

d) loss of employment, long term sick leave, negative disposable income

and needing a vehicle for work.

TD referred to these matters repeatedly and emphasised how VWFS was making
matters worse. For example, TD drew attention to divorce or anxiety in 14
telephone calls to 12 different VWFS workers and once in writing.

Indeed, just over two weeks after TD told VWFS that he had recently tried to
take his own life, VWFS continued to send TD correspondence that he
considered to be threatening.

That correspondence included a letter demanding payment within 7 days and a
Default Notice in respect of repossession fees.

Further, despite TD’s disclosures, VWFS did not (a) ask TD any questions to
understand his vulnerabilities and any tailored support required; (b) proactively
telephone TD. That included omitting to make an outbound call as required by

the Pre-Termination Checklist, even though VWFS had told TD in writing that it
had done so.

In a number of instances, VWFS did not carry out agreed actions, such as failing
to: (a) honour agreed call backs before sending Default Notices; (b) send a
letter explaining a breakdown of sums owed; (c) send TD an accepted goodwill
gesture, and then denying it had been accepted.

Overall, VWFS did not change how it communicated with TD. TD felt VWFS’s
attitude was that it didn’t want to know. For example, the following exchange
took place during a telephone call (which followed an earlier call in which TD
had expressly told VWFS “You are speaking to a vulnerable customer and you’ve
not helped me.”):

“TD: …No one seemed to help. I was offering to make the payments. I was back in
work. I was in a better paid job. I was willing to make the contractual payments
plus the extra payment to be clear some of the debt. I did explain to them that I
have been mega stressed through going through a very nasty divorce and I wasn’t
seeing my children. And I suffered with acute anxiety and also depression and
suicidal thoughts. And it just got put on a brick wall. And it was just making me
worse. And I’ve got letters from doctors to say I suffer from acute anxiety and that
I struggle to deal with stuff. And no one wanted to listen…They have not treated
me fairly. They have not treated me with due courtesy of trying to sort something
out just point blank: ‘now it’s terminated’.

VWFS: OK. Many of the points you’ve just made have already been resolved in other
complaints you’ve had with us so I’m not going to be investigating part of a
complaint that has already been resolved…”

That lack of empathy was reflected in VWFS’s agents’ tone of voice (for
example, when (a) sarcastically reminding TD of the number of days in a month,
(b) putting TD through to different departments which could not help him and
(c) an agent informing TD “I am the highest point of authority you can speak
to” after TD had already been promised a manager call-back) and in writing (for
example, when accusing TD of disregarding his liability for the arrears and when
urging TD to contact VWFS “immediately” to make proposals without providing
any options).

On the occasions where VWFS had ostensibly expressed sympathy, this was not
matched with appropriate action. That included VWFS (a) not dealing
adequately with the need to set up a payment plan with TD (which he had
repeatedly offered) – at one point VWFS refused to entertain payment plans at
all; and (b) offering to raise complaints instead of dealing with the substantive
issue of the need to find a solution for TD.

During those 11 months, VWFS terminated the agreement, repossessed TD’s
family estate car, and continued to pursue TD for the shortfall.

After this 11-month period, and very belatedly, VWFS placed a vulnerability flag
on TD’s account. That action appeared to have been prompted by TD’s
application for breathing space in which TD disclosed that his current sickness
could last six months.

Upon expiry of the breathing space, when VWFS finally set up a (very short-
term) ATP with TD, VWFS did not consider the suitability of enhanced
forbearance options that might have been available for long term vulnerable
customers such as TD.

Before falling into arrears, TD had not missed a payment for over 2 years.

II.
Forbearance and due consideration

4.56
As regards forbearance and due consideration, VWFS’s treatment of its arrears

customers fall under two broad headings, namely: (a) Advisers failing to explore

customer circumstances, feeding into (b) Advisers offering an inadequate range

of forbearance options. The Authority’s findings are as follows:

Lack of exploration of customer circumstances

4.56.1
there was limited or no probing of customer circumstances in order to

identify suitable forbearance options where there were indicators of

financial difficulty, despite the Collections Journey requiring Advisers

to ask questions to gain this understanding;

4.56.2
there was limited evidence of affordability assessments being used

when agreeing arrangements with customers in financial difficulty.

Advisers often relied on a simple verbal confirmation from a customer

that an arrangement was affordable, without any further information

or probing. Indeed, affordability assessments were not conducted in

almost all cases in the sample, and where they had, this was only after

previous arrangements had not been maintained. That was despite the

Collections Journey emphasising that, as a responsible lender, VWFS

needed to calculate the affordability and sustainability of repayment

plans, and to “always” look to work with the customer to tailor

arrangements according to their financial circumstances – using

affordability assessments where applicable. The lack of affordability

assessments meant that VWFS could not show that payment

arrangements were set at the right level. Further, an appropriate

assessment of affordability at an early stage would have better

equipped the customer and VWFS to make an informed decision about

their options;

Inadequate range of forbearance options

4.56.3
as there was limited or no probing of customer circumstances, Advisers

were not in a position to provide customers with tailored support that

was sustainable;

4.56.4
moreover, the support offered was often not sustainable. Despite the

Collections Journey providing for a wide range of forbearance options

including (a) a promise to pay (b) sale or part exchange of the vehicle,

and (c) the customer voluntarily terminating the agreement,

forbearance options presented were typically short-term ATPs (that is,

limited to 12 months or the remaining term of the agreement, if less

than 12 months). These ATPs would often break continuously, despite

the Collections Journey emphasising the importance of Advisers

assessing the customer’s current circumstances to provide them with

all possible support to make the “best informed” decision; and

4.56.5
after termination, customers in financial difficulty were often

presented with early settlement or voluntary termination as the only

options available.

4.57
In order to pay due regard to the interests and information needs of arrears

customers, VWFS needed to take adequate measures to properly understand the

customer’s individual circumstances, including their short-term and long-term

financial position. Where customers presented indicators of financial difficulty,

VWFS needed to sufficiently probe customer circumstances in order to put itself

in a position where it could provide tailored support that was sustainable. VWFS

needed to obtain sufficient information on customer circumstances in order to

identify, consider and apply appropriate forbearance – including, where

appropriate, offering a range of options to support customers beyond ATPs. VWFS

further needed to regularly monitor and review all customers’ arrangements, to

ensure they remained appropriate.

Case Study 2 – “…I’ve just told you I’m in financial difficulty and you’re
telling me it’s going to cost me 20 grand to give you the car back?”

Around 15 months after taking out car finance, Customer CD (CD) found himself
in financial difficulty and could no longer afford the repayments.

Having called VWFS to find a solution, the agent did not ask any questions about
CD’s financial difficulties or mention the support VWFS could provide – even
though CD referenced his financial difficulties three times during the call. That
support may have included a range of forbearance options, including an ATP, a
promise to pay or the sale or part exchange of the vehicle.

Instead, the agent took an overly narrow approach – responding strictly to CD’s
queries about the mechanics of voluntary termination – without stepping back
and thinking more broadly about how to take account of the need to tailor the
approach to CD’s individual circumstances.

The only alternative presented by the agent to voluntary termination was to
generate a settlement figure, which was well in excess of what CD had told the
agent he could afford.

This resulted in a poor-quality conversation. Indeed, during that call, CD asked:
“I’ve just told you I’m in financial difficulty and you’re telling me it’s going to cost
me 20 grand to give you the car back?”, to which the agent responded in the
affirmative.

Around 11 months after that telephone call, during which time CD managed to
keep up with his monthly payments, CD found he could no longer cope. CD
emailed VWFS as follows:

“My wife left 3 weeks ago, my business is based around commercial global office
branding, which over last few months have been arranging to shut down and wait
until the chaos to subside and the last jobs I had in hand and was basing financial
security on was with [Company Y] who put all on hold and postponed for minimum
of three weeks because of the Coronavirus. My auntie who is the last of my mothers

side of my family has just been told that her husband has to go onto palliative care
at home as hospitals moving him away from Virus. As I have been self isolated by
my wife moving out 3 weeks ago [I’m] the only person who can help her look after
him and be around a cancer patient. Please can you help me”

VWFS did not engage with that email in any substantive way. VWFS did not seek
to telephone CD or adapt the way it communicated with him. Nor did VWFS seek
to conduct an affordability assessment. VWFS did not add a vulnerability flag to
CD’s account at any stage.

Around a year later, VWFS left CD a voicemail, which provided no indication as
to the support that VWFS could provide, including as to CD’s indications of
vulnerability and financial difficulty.

VWFS
commenced
hostile
termination
shortly
afterwards
followed
by

repossession. Eventually, after commencing litigation for the balance and
repossession fee, as VWFS judged there to be no recovery prospects, VWFS
wrote off the remaining debt.

Before informing VWFS about his financial difficulties, CD asked VWFS to raise a
complaint about an agent providing (what was said to be) incorrect information
about payments. VWFS responded that CD could raise a complaint, which CD
agreed to, but no complaint was logged or investigated. This meant VWFS neither
provided CD with a response to the complaint nor informed CD that he could
refer the matter to the Financial Ombudsman Service.

III.
Termination and repossession

4.58
The Authority’s findings are that, despite the Collections Journey describing

repossessions initiated by VWFS as a last resort:

4.58.1
customers presenting indicators of financial difficulty or vulnerability

were progressed to termination and repossession without assessment

of their circumstances, affordability and consideration of an

appropriate range of forbearance options;

4.58.2
VWFS made limited attempts to call customers before repossession,

often making only the minimum single call attempt required by the

Pre-Termination Checklist. In some cases, VWFS did not even attempt

contact despite having contact details on file. In other cases, VWFS did

not check compliance with the Pre-Termination Checklist;

4.58.3
when customers engaged with VWFS at the point of termination,

including where they were offering to pay the arrears in full, VWFS told

customers that settlement in full was the only option to prevent

repossession and VWFS would not consider or discuss forbearance at

that stage;

4.58.4
when customers engaged with VWFS at the point of repossession and

after the initial contact from repossession agents, they were advised

that settlement in full was the only option to prevent repossession and

that VWFS would not consider or discuss forbearance at that stage.

That was despite the Collections Journey providing that repossession

agents were granted “autonomy” to deliver appropriate outcomes

based on the customer’s individual circumstances; and

4.58.5
at the point of repossession, VWFS did not grant customers time to

repay arrears where they had presented reasonable offers to do so.

That was despite the Collections Journey stating that repossession

agents were directed in such cases to make it clear that VWFS was

willing to consider the proposal. Examples included: (a) customers

seeking more time to settle accounts subject to a court settlement or

pending the sale of the vehicle; and (b) a customer offering to clear

the arrears in full having complained that VWFS did not consider

forbearance options.

4.59
Further, up until September 2022, VWFS charged customers a repossession fee

of £252 irrespective of their circumstances. This may have compounded such

customers’ financial difficulty with little consideration of how these fees would be

paid. Moreover, VWFS did not consistently highlight repossession fees to

customers at the time of termination, including in writing.

4.60
In order to pay due regard to the interests and information needs of arrears

customers, VWFS needed to have taken all reasonable steps to resolve customer

arrears positions before progressing cases to termination and repossession.

Failures to deal appropriately with customers facing termination and repossession

potentially have a significant and ongoing impact on a customer, not least on their

ability to obtain future credit or lending at competitive rates and access to full

market options or at all. VWFS needed to have remained open to entertaining

forbearance with customers at the point of termination and repossession. VWFS

needed to have adequately drawn attention to the levying of any repossession

fees and needed to have taken sufficient steps to ensure that the levying of any

such fees was fair.

4.61
The Authority considers that VWFS’s conduct in relation to repossessions to be

particularly serious in light of (amongst other things) the risk of harm being

4.61.1
for those customers who relied on their vehicle to travel to and from

work or indeed use their vehicles for work, as repossession may have

compounded their financial difficulties; and

4.61.2
for vulnerable customers, for whom repossession (or indeed the threat

of repossession) may – owing to their vulnerability – have had a more

serious impact.

Case Study 3 – “There’s nothing that we can do once it’s been hostile
terminated.”

Customer JB (JB) was young and lived with her parents when she took out car finance.

JB immediately fell behind on payments, telling VWFS (amongst other things) “I can’t
pay”. That should have prompted VWFS to conduct an affordability assessment. It didn’t.
Instead of displaying any curiosity, the agent transferred her to Collections without any
“warm transfer” as to JB’s disclosure.

Having asked JB whether she could afford the monthly payments, and having taken JB’s
affirmative response at face value, Collections set up a very short-term payment
arrangement.

That kept JB’s head above the water until she fell into arrears a few months later. VWFS
issued JB with two standard automated Letter Templates, a text and a Default Notice.
JB responded by email that:

a) she had lost her job owing to mental health issues; however

b) now that she had returned to work, JB wished to set up a payment arrangement

to clear the outstanding balance.

Instead of engaging with JB’s email or adapting its treatment of JB, VWFS terminated
the agreement and commenced repossession. That occurred less than one month after
JB’s email.

Before the point of termination, VWFS made one proactive telephone call, pursuant to
the minimum requirement in the Pre-Termination Checklist. That took the form of VWFS
leaving a voicemail requesting a call back within three working days. The voicemail did
not indicate that VWFS was there to help or how it might do so.

JB got in touch with VWFS after their repossession agent had visited JB’s home, during
which the agent spoke to JB’s mother and passed her a contact card. JB repeated to the
agent the issues around her mental health. The agent noted that JB was very upset to
learn that her options were limited to:

a) returning the car; or

b) paying off the outstanding balance in full.

JB (and her mother) then spoke with Collections and asked if VWFS could do anything
regarding a payment arrangement, having referenced JB’s job loss three times. Whilst
ostensibly expressing sympathy, the Adviser stated that the options presented by the
repossession agent were the only options available and that JB needed to contact the
repossession agent. Further, if the outstanding balance could not be paid, the car would
need to be collected and sold at auction.

The Adviser added “there’s nothing that we can do once it’s been hostile terminated”.
When JB did get back in touch with the repossession agent, the file note recorded that
JB was “in floods of tears possibly due to circumstances”.

To prevent the car being collected and sold at auction (which JB’s mother considered
would likely have left JB with a higher shortfall), JB’s mother managed to arrange a
third-party sale. JB’s mother updated Collections and queried again whether JB could
set up a payment arrangement for the shortfall, which was something the repossession
agent had not been prepared to entertain.

The Adviser noted that JB would need to contact the repossession agent who “might”
be able to consider a payment arrangement – emphasising that “we don’t have any say
in it after it’s been terminated”.

It turned out that the repossession agent was not prepared to do so. In advance of the
sale of the car, VWFS wrote to JB with a total settlement figure, noting that as soon as
payment had been received “in full”, VWFS would release its interest in the car.

Faced with that choice, JB paid the outstanding balance in full at once. That included an
amount of £252 described to JB as a “sundry debit” and an “adjustment”. In actual fact,
this was a repossession fee.

At no stage did VWFS place a vulnerability flag on JB’s account or seek to conduct an
affordability assessment. Nor did VWFS pick up on JB’s multiple indicators of
vulnerability, specifically her mental health difficulties and income shock.

IV.
Customer communications

4.62
The Authority’s additional findings in this regard (reiterating the substantial

overlap with this section and the other three areas of concern) are that, whereas

the Collections Journey required Collections to communicate with customers

positively and empathetically:

4.62.1
Advisers displayed a lack of empathy and professionalism during

telephone calls. Examples included (a) repeatedly and sarcastically

referring to a customer as a “delight”; (b) stating emphatically and

erroneously that direct debits could not be changed, (c) laughing

inappropriately when making mistakes; (d) sighing; (e) not

acknowledging customer frustration; and (f) not offering an apology

when it would clearly have been reasonable to do so, such as for long

wait times;

4.62.2
Advisers provided customers with incorrect or incomplete information

during telephone calls (for example, in relation to ATPs, arrears

balances, settlement figures and credit file impact);

4.62.3
there was a lack of proactive outbound telephone contact in most cases

including by way of follow-up to customers who had engaged with

Collections. Often, Collections only made one outbound attempt to

satisfy the minimum requirement in the Pre-Termination Checklist;

Letters, emails and texts

4.62.4
where post had been returned and a “gone away” status had been

applied to the account, Collections did not attempt other ways of

contacting such customers or trace their address;

4.62.5
Collections did not send customers arrears letters in a timely manner

(examples included Collections sending customers (a) missed payment

letters two months after a missed payment; and (b) Notices of Sums

in Arrears without any preceding arrears communications). This meant

that VWFS did not provide sufficient and timeous information to enable

customers to avoid moving into the later stages of the Collections

Journey;

4.62.6
Collections’ responses to customer email requests were either lacking

or delayed;

4.62.7
VWFS sent customers standard arrears communications (such as a

Default Notice or letters relating to termination) instead of appropriate

follow-up contact after agreeing to ATPs;

4.62.8
Collections did not suspend collections activity during breathing space

periods as required by the Collections Journey (for example, customers

continued to receive standard templated arrears letters during such

breathing space periods);

4.62.9
consistent with the Consultancy Firm’s observations as to VWFS’s

Letter and Email Templates, a substantial proportion of VWFS’s

standard templated arrears communications – including automated

correspondence sent to 155,070 customers who at the very least were

issued with the first post-grace period missed payment letter – did not

sufficiently enable customers to engage in the arrears process on an

informed basis, including as regards supporting and encouraging

customers to make contact for a positive conversation about resolving

their situation. The Authority’s findings in this regard apply throughout

the Collections Journey, from the first missed payment letter onwards.

In particular:

a)
Letter and Email Templates relating to missed payments and

ATPs focused on how the customer could make payment without

explaining what VWFS could do to help customers who may be

in financial difficulty. One of these Letter Templates set

deadlines that were likely to be unrealistic on their own terms;

b)
text messages requested customers to call VWFS “as soon as

possible” to discuss outstanding balances without indicating

that the purpose of that discussion was for VWFS to help

customers with any financial difficulties;

c)
Letter and Email Templates which acted as cover letters for

affordability assessments did not explain the benefits of filling

out the affordability assessment. They did not identify what

forbearance options might be possible upon completion and

return of the affordability assessment;

d)
Letter and Email Templates informing customers that recovery

of the debt had been outsourced gave the impression that VWFS

had ended its relationship with the customer without indicating

that the third party would be open to help customers with any

financial difficulties (as set out in the Collections Journey). The

Email Template added that VWFS could not consider a payment

plan owing to the current financial situation of the customer;

e)
once a Default Notice had been issued, and a call had been

attempted, VWFS used Email Templates to demand customers

take action “within three working days” to avoid termination,

without explaining the benefits of the customer making contact;

f)
termination Letter and Email Templates provided insufficient

information about the options and help that might be available,

and in some instances used unnecessary legal and technical

language;


4.62.10
Notices of Sums in Arrears provided total shortfall amounts without

explaining how those sums were reached, including by way of a

breakdown between (a) missed payments; and (b) fees and charges.

Where customers contacted VWFS to request a breakdown of the

amounts, VWFS’s systems had a “known limitation” which meant it

was not easy for Collections to obtain this information, particularly for

repossession agents who had to rely on “weekly balance breakdown

reports” as a workaround. In some cases, customers found Advisers

were unable to provide correct information about the breakdown;

4.62.11
Default Notices referred to “late payment interest” under the heading

“Intended Action”, even though VWFS had no intention of applying late

payment interest at the point such Default Notices were issued as it

was VWFS’s policy not to levy default interest or charges in respect of

accounts in arrears. The reference to “late payment interest” in Default

Notices will likely have added to customers’ distress and confusion,

and may have caused undue pressure to pay the debt. The reference

to “late payment interest” in respect of Email Templates confirming

that VWFS had agreed to breathing space will also likely have added

to customers’ distress and confusion;

Communication more generally

4.62.12
Collections continued to contact deceased customers by post and

telephone, despite having been notified of their passing. Such

communications will have been particularly distressing. One case of

severe distress involved VWFS sending a deceased customer a

Christmas card, which was received by the next of kin;

4.62.13
where an Adviser had agreed to an action after discussions with the

customer by telephone or email, the Adviser completed the action

incorrectly or not at all (for example, agreed call backs were not

honoured); and

4.62.14
Advisers did not consistently recognise and log complaints where

customers expressed dissatisfaction with VWFS. This meant that

VWFS’s complaint procedures did not kick in, which in some cases will

have deprived such customers the protections they would otherwise

have received under DISP, including the need to be told by VWFS

about their ability to refer the matter to the Financial Ombudsman

Service.

4.63
In order to pay due regard to the information needs of arrears customers, VWFS

needed to have enabled arrears customers to engage in the arrears process on

an informed basis by: (a) using a range of communication channels such that

customers are able to readily access the help and support they need; (b) setting

the right tone in these communications by explaining the benefits of engaging

early when at risk of or in financial difficulty and emphasising the support the firm

can provide; and (c) enabling all customers including those who may be more

vulnerable to discuss their needs and respond flexibly to these needs and

circumstances.

4.64
The Authority considers that VWFS’s conduct in relation to customer

communications to be particularly serious given that (amongst other things):

4.64.1
effective communication was fundamental to VWFS’s ability to (a)

treat arrears customers fairly, reasonably and responsibly and (b)

communicate with customers clearly and fairly;

4.64.2
the issues with respect to VWFS’s communications may have

compounded the significant uncertainty, stress and anxiety, arrears

customers – and particularly vulnerable customers – may have

experienced about their financial circumstances; and

4.64.3
the issue of customer communications applied to all cases in the

sample, and cut across the other issues. Those communication failings

were compounded by the fact that VWFS’s main communication

method for arrears customers was to send standard templated arrears

communications throughout the collections process, from the first

missed payment letter onwards, a substantial proportion of which –

including automated correspondence sent to 155,070 customers – did

not sufficiently enable customers to engage in the arrears process on

an informed basis, including as regards supporting and encouraging

customers to make contact for a positive conversation about resolving

their situation.

D.
How has VWFS sought to put things right?

4.65
Prompted by the BiFD Feedback and the consequent Past Business Review, and

having acknowledged that some of the customer journeys in the Consultancy File

Review were “undoubtedly” below standards, VWFS commenced the Remediation

Scheme.

4.66
The Remediation Scheme comprised:

4.66.1
a redress scheme (the Redress Scheme), which involved:

a)
certain customers whose arrears had persisted for 31 days or

more in the period 1 January 2017 to 31 July 2023 receiving a

goodwill gesture ranging from £100 to £400. The amount

depended on the amount of time in arrears and the number of

missed payments. Goodwill gestures were made whether or not

the account remained in arrears;

b)
end-to-end reviews of certain customer files already within the

repossession and litigation stage of the Collections Journey,

which were “live” soon after BiFD Feedback. The purpose of

these reviews was to: (i) assess whether repossession should

continue; and (ii) consider whether any remediation may be

appropriate,
ranging
from
compensation
to
deferring

repossession and writing off the debt; and

4.66.2
measures designed to improve VWFS’s regulatory compliance such as:

a)
applying a new engagement strategy for all customers, which

included
remedying
the
standard
templated
arrears

correspondence;

b)
putting Collections through a six-week training programme “to

ensure that advisors get the right customer outcomes”;

c)
changing Collections’ operating model and VWFS’s relationship

management model with outsourced service providers; and

d)
addressing VWFS’s compliance function’s assessment that it

could not provide assurance that Collections’ quality assurance

framework was fit for purpose.

4.67
VWFS has identified at least 109,589 customers who suffered detriment, or were

at risk of suffering detriment, as a result of the failings. VWFS has to date paid

£17,823,500 under the Redress Scheme to 80,191 customers and estimates that

it will pay over £21,506,496 in total redress payments.

5
FAILINGS

5.1
Statutory and regulatory provisions relevant to this Notice are set out in the

Annex.

5.2
Based on the facts and matters detailed above, the Authority finds that VWFS

5.2.1
Principle 6 which requires that a firm must pay due regard to the

interests of its customers and treat them fairly;

5.2.2
Principle 7 which requires that a firm must pay due regard to the

information needs of its clients, and communicate information to them

in a way which is clear, fair and not misleading;

5.2.3
Principle 3 which requires that a firm must take reasonable care to

organise and control its affairs responsibly and effectively, with

adequate risk management;

5.2.4
CONC 7.2.1R, 7.3.4R, 7.3.9R, 7.3.14R(1); and

5.2.5
DISP 1.3.1R.

5.3
VWFS breached these rules in that:

Vulnerable customers – Principle 6, Principle 7 and CONC 7.2.1R

5.3.1
by failing to sufficiently probe arrears customers presenting indicators

of vulnerability, VWFS failed to understand the nature of the

vulnerability and any tailored support that may be required;

5.3.2
by failing to sufficiently record vulnerability indicators – a failure rate

of around 92% of applicable cases in the sample – and act upon the

same, VWFS progressed some customers to termination and

repossession without taking account of such indicators;

5.3.3
this meant that VWFS failed to (a) recognise vulnerability; (b) take

particular care to ensure vulnerable customers were treated fairly,

having regard to the failure to follow specific procedures designed to

support vulnerable customers including as regards vulnerability flags,

affordability assessments, tailored communications and enhanced

forbearance options; and (c) take a proactive approach when

supporting vulnerable customers. These failures also led to some

customers presenting indicators of vulnerability stating specifically

that VWFS’s actions caused them additional distress and upset;

Forbearance and due consideration– Principle 6, Principle 7, CONC

7.2.1R and CONC 7.3.4R

5.3.4
where customers presented indicators of financial difficulty, by failing

to (a) sufficiently or at all probe customer circumstances in order to

identify suitable forbearance options; and (b) identify some arrears

customers presenting indicators of financial difficulty; and (c) conduct

affordability assessments (noting that affordability assessments were

not conducted in almost all cases in the sample), VWFS did not place

itself in a position where it could provide customers with tailored

support that was sustainable;

5.3.5
by failing to obtain sufficient information on customer circumstances,

VWFS did not identify, consider, and apply appropriate forbearance

and due consideration. This resulted in VWFS failing to offer some

customers (a) forbearance at all or (b) forbearance that was effective,

affordable and sustainable, which would have positively impacted their

arrears position. Indeed, forbearance predominantly took the form of

short-term ATPs which would often break continuously. That tended to

show that arrears customers had agreed to pay within an unreasonably

short period or more than they could reasonably afford without

experiencing difficulty;

Default, termination and repossession – Principle 6, Principle 7,

CONC 7.2.1R, CONC 7.3.4R, CONC 7.3.9R, CONC 7.3.14R(1)

5.3.6
by failing to entertain forbearance with customers at the point of

termination and repossession, VWFS operated a policy in practice of

refusing to negotiate with customers who were developing repayment

plans;

5.3.7
by progressing some customers presenting indicators of financial

difficulty or vulnerability to termination and repossession without

taking all reasonable steps to resolve customer arrears positions

beforehand – including limited (if any) attempts to call customers

before repossession – VWFS took disproportionate action against such

customers and failed to treat them fairly;

5.3.8
by charging customers repossession fees irrespective of their

circumstances, VWFS did not take sufficient steps to ensure that the

levying of such fees was fair. This may have compounded such

customers’ financial difficulty with little consideration of how these fees

would be paid;

5.3.9
by failing to consistently highlight repossession fees to customers at

the time of termination, including in writing, VWFS failed to

communicate repossession fees to arrears customers clearly and

fairly;

Customer communication - Principle 7, Principle 6, CONC 7.2.1R and

DISP 1.3.1R

5.3.10
by failing to engage with some customers proactively or reactively

(including by telephone and email) in an appropriate manner or at all

– having regard to the way VWFS used each of the communication

channels individually and as a whole, VWFS failed to:

a)
treat arrears customers fairly, reasonably and responsibly;

b)
communicate with arrears customers clearly and fairly;

5.3.11
the failings as regards communications, which cut across all the other

issues,
were
compounded
by
the
fact
that
VWFS’s
main

communication method for arrears customers was to send standard

templated arrears communications, a substantial proportion of which

– including automated correspondence sent to 155,070 customers –

failed to sufficiently enable customers to engage in the arrears process

on an informed basis, including by failing to support and encourage

customers to make contact for a positive conversation about resolving

the situation;

5.3.12
these issues may have compounded the significant uncertainty, stress

and anxiety arrears customers – and particularly vulnerable customers

– may have experienced (including in relation to the reference to “late

payment
interest”
in
Default
Notices)
about
their
financial

circumstances;

5.3.13
by failing to identify some complaints and treat them as such, VWFS

failed to handle complaints effectively; and

Management and control – Principle 3 and CONC 7.2.1R

5.3.14
by failing to implement arrears and vulnerability policies and

procedures over a period of six years and seven months which, if

implemented, would have resulted in VWFS likely avoiding the extent

of the above failings (in particular as regards (a) supporting vulnerable

customers; (b) recognising, considering and applying appropriate

forbearance and due consideration; (c) taking all reasonable steps to

resolve customer arrears positions before progressing customers to

termination and repossession; and (d) communicating with customers

clearly and fairly), VWFS failed to take reasonable care to organise and

control its affairs responsibly and effectively in practice, with adequate

risk management systems.

6
SANCTION

6.1
The Authority’s policy for imposing a financial penalty is set out in Chapter 6 of

the Decision Procedure and Penalties (DEPP) manual. The Authority applies a

five-step framework to determine the appropriate level of financial penalty. DEPP

6.5A sets out the details of the five-step framework that applies in respect of

financial penalties imposed on firms.

Step 1: disgorgement

6.2
Pursuant to DEPP 6.5A.1G, at step 1 the Authority seeks to deprive a firm of the

financial benefit derived directly from the breach where it is practicable to

quantify.

6.3
The Authority has not identified any financial benefit that VWFS derived directly

from the breach.

6.4
Step 1 is therefore £0.

Step 2: the seriousness of the breach

6.5
Pursuant to DEPP 6.5A.2G, at step 2 the Authority determines a figure that reflects

the seriousness of the breach. Where the amount of revenue generated by a firm

from a particular product line or business area is indicative of the harm or potential

harm that its breach may cause, that figure will be based on a percentage of

VWFS’s revenue from the relevant products or business area.

6.6
The Authority considers that the revenue generated by VWFS is indicative of the

harm or potential harm caused by its breach. The Authority has therefore

determined a figure based on a percentage of VWFS’s relevant revenue. VWFS’s

relevant revenue is the revenue derived by VWFS, during the period of the breach,

from their customers whilst they were in arrears and had entered the collections

process. The period of VWFS’s breach was from 1 January 2017 to 31 July 2023.

The Authority considers VWFS’s relevant revenue for this period to be

£70,098,961.19.

6.7
In deciding on the percentage of the relevant revenue that forms the basis of the

step 2 figure, the Authority considers the seriousness of the breach and chooses

a percentage between 0% and 20%. This range is divided into five fixed levels

which represent, on a sliding scale, the seriousness of the breach. The more

serious the breach, the higher the level. For penalties imposed on firms there are

five levels:

Level 1 – 0%

Level 2 – 5%

Level 3 – 10%

Level 5 – 20%

6.8
In assessing the seriousness level, the Authority takes into account various factors

which reflect the impact and nature of the breach, and whether it was committed

deliberately or recklessly. The factors that the Authority has determined to be

relevant to VWFS’s breaches are as follows:

Impact of the breach

6.8.1
the loss or risk of loss caused to individual consumers caused by

VWFS’s breach. VWFS failed to appropriately consider customer

interests and their information needs and mitigate the harm and risk

of harm as regards individual consumers in financial difficulty,

particularly those who were vulnerable (DEPP 6.5A.2G(6)(c));

6.8.2
the breaches had an effect on particularly vulnerable people, whether

intentional or otherwise, not least because a substantial proportion of

customers in arrears are likely to be vulnerable. VWFS failed to ensure

it identified and flagged potentially vulnerable customers, which

undermined VWFS’s ability to ensure a fair outcome was achieved

including in relation to termination and repossession (DEPP

6.5A.2G(6)(d));

6.8.3
the breaches must have caused inconvenience or distress to

consumers. VWFS’s failure to identify, consider and apply appropriate

forbearance and due consideration meant that VWFS did not offer

some customers effective, affordable and sustainable forbearance that

would otherwise have positively impacted their arrears position and in

some cases led to premature termination and repossession, thereby

causing
inconvenience
and
distress
to
its
customers
(DEPP

6.5A.2G(6)(e));

Nature of the breach

6.8.4
the nature of the rules, requirements or provisions breached. The

requirements of Principles 6, 7, 3 and CONC should be a fundamental

consideration in everything that those who are authorised to provide

consumer credit do. VWFS’s lack of compliance with the rules around

treatment of arrears customers, including in relation to customers

VWFS understood or reasonably suspected to be particularly

vulnerable, fell below the standard expected of the industry (DEPP

6.5A.2G(7)(a));

6.8.5
the frequency and duration of the breach. The breach occurred

throughout the Relevant Period: namely, six years and seven months

(DEPP 6.5A.2G(7)(b)); and

6.8.6
the breach revealed serious or systemic weaknesses in the

implementation of the firm’s policies and procedures relating to its

treatment of arrears customers (DEPP 6.5A.2G(7)(c)).

6.9
DEPP 6.5A.2G(11) lists factors likely to be considered level 4 or 5 seriousness. Of

these, the Authority considers the following factors to be relevant:

6.9.1
the breach caused a significant loss or risk of loss to individual

consumers (DEPP 6.5A.2G(11)(a)). The aspects of VWFS’s breach that

specifically impacted individual vulnerable consumers were particularly

serious. In particular:

a)
the Consultancy File Review highlighted that potentially

vulnerable customers stated specifically that VWFS’s actions

caused them additional distress and upset;

b)
by failing to sufficiently probe and record vulnerability

indicators and act upon the same, VWFS must have progressed

some vulnerable customers to termination and repossession

without taking account of such indicators. Taking cars away

from vulnerable customers in those circumstances might

compound vulnerabilities;

c)
VWFS was aware that vulnerable customers were more likely

to experience harm and, where there is actual harm, the impact

is likely to be greater than other customers; and

6.9.2
the breach revealed serious and systemic weaknesses in the

implementation of the firm’s policies and procedures relating to its

treatment of arrears customers (DEPP 6.5A.2G(11)(b)), including as

regards the communication failings, compounded by deficient standard

templated and automated arrears correspondence. All of VWFS’s

customers who (a) entered into regulated agreements covered by

Collections; and (b) whose arrears persisted beyond the grace period

– namely, 155,070 customers – were at risk of receiving poor

experiences or outcomes throughout the Relevant Period.

6.10
DEPP 6.5A.2G(12) lists factors likely to be considered level 1, 2 or 3 seriousness.

Of these, the Authority considers the following factors to be relevant:

6.10.1
little, or no profits were made or losses avoided as a result of the

breach, either directly or indirectly (DEPP 6.5A.2G(12)(a)); and

6.10.2
the breach was committed negligently or inadvertently (DEPP

6.5A.2G(12)(e)).

6.11
Taking all of these factors into account, the Authority considers the seriousness

of the breach to be level 3 and so the step 2 figure is 10% of £70,098,961.19.

6.12
Step 2 is therefore £7,009,896.12.

Step 3: mitigating and aggravating factors

6.13
Pursuant to DEPP 6.5A.3G, at step 3 the Authority may increase or decrease the

amount of the financial penalty arrived at after step 2, but not including any

amount to be disgorged as set out in step 1, to take into account factors which

aggravate or mitigate the breach.

6.14
The Authority considers that the following factors aggravate the breach:

6.14.1
VWFS did not self-identify the breaches. The breaches were brought

to VWFS’s attention by the Authority following file review work

conducted by the Authority; and

6.14.2
whereas the Authority published Final Notices in relation to similar

arrears handling weaknesses (in particular, in respect of: (a) Yorkshire

Building Society on 28 October 2014; (b) Moneybarn on 17 February

2020; (c) Lloyds on 11 June 2020; and (d) Barclays on 15 December

2020), VWFS did not review the adequacy of its implementation of its

policies and procedures in light of these publications.

6.15
The Authority considers that the following factors mitigate the breach:

6.15.1
VWFS acknowledged the failings raised by the Authority, and prompted

by the Authority, voluntarily undertook the Redress Scheme, providing

redress to certain customers who were likely to be impacted by its

failings;

6.15.2
VWFS made significant enhancements to its Collections function in an

effort to ensure that similar issues do not arise in the future; and

6.15.3
VWFS cooperated with the Authority during its investigation, having

promptly and voluntarily commissioned a review into the matters

referred to in this Notice following feedback from the Authority. VWFS

timeously accepted the findings of the Consultancy Firm.

6.16
Having taken into account these aggravating and mitigating factors, the Authority

considers that the step 2 figure should be subject to a 10% uplift at step 3.

6.17
Step 3 is therefore £7,710,885.73.

Step 4: adjustment for deterrence

6.18
Pursuant to DEPP 6.5A.4G, if the Authority considers the figure arrived at after

step 3 is insufficient to deter the firm who committed the breach, or others, from

committing further or similar breaches, then the Authority may increase the

penalty.

6.19
The Authority considers that the step 3 figure of £7,710,885.73 represents a

sufficient deterrent to VWFS and others, and so has not increased the penalty at

step 4.

6.20
Step 4 is therefore £7,710,885.73.

Step 5: settlement discount

6.21
Pursuant to DEPP 6.5A.5G, if the Authority and the firm on whom a penalty is to

be imposed agree the amount of the financial penalty and other terms, DEPP 6.7

provides that the amount of the financial penalty which might otherwise have

been payable will be reduced to reflect the stage at which the Authority and the

firm reached agreement. The settlement discount does not apply to the

disgorgement of any benefit calculated at step 1.

6.22
As the Authority and VWFS reached agreement at Stage 1, a 30% discount applies

to the step 4 figure.

6.23
The step 5 figure (rounded down to the nearest £100) is therefore £5,397,600.

6.24
The Authority therefore hereby imposes a total financial penalty of £5,397,600 on

VWFS for breaching:

6.24.1
Principles 6, 7 and 3;

6.24.2
CONC 7.2.1R, 7.3.4R, 7.3.9R, 7.3.14R(1); and

6.24.3
DISP 1.3.1R.

7
PROCEDURAL MATTERS

7.1
This Notice is given to VWFS under and in accordance with section 390 of the

Act.

7.2
The following statutory rights are important.

Decision maker

7.3
The decision which gave rise to the obligation to give this Notice was made by the

Settlement Decision Makers.

Manner and time for payment

7.4
The financial penalty must be paid in full by VWFS to the Authority no later than

4 November 2024.

If the financial penalty is not paid

7.5
If all or any of the financial penalty is outstanding on 5 November 2024 the

Authority may recover the outstanding amount as a debt owed by VWFS and due

to the Authority.

7.6
Sections 391(4), 391(6) and 391(7) of the Act apply to the publication of

information about the matter to which this notice relates. Under those provisions,

the Authority must publish such information about the matter to which this notice

relates as the Authority considers appropriate. The information may be published

in such manner as the Authority considers appropriate. However, the Authority

may not publish information if such publication would, in the opinion of the

Authority, be unfair to you or prejudicial to the interests of consumers or

detrimental to the stability of the UK financial system.

7.7
The Authority intends to publish such information about the matter to which this

Final Notice relates as it considers appropriate.

Authority contacts

7.8
For more information concerning this matter generally, contact Philip Cohen

(Philip.Cohen@fca.org.uk) or Bibhu Aggarwal (Bibhu.Aggarwal@fca.org.uk) at the

Authority.

Dee O’Sullivan

Financial Conduct Authority, Enforcement and Market Oversight Division

ANNEX

RELEVANT STATUTORY AND REGULATORY PROVISIONS

1.
Relevant Statutory Provisions

1.1
The Authority’s statutory objectives, set out in section 1B(3) of the Act, include

securing an appropriate degree of protection for consumers.

1.2
Section 206(1) of the Act provides:

“If the appropriate regulator considers that an authorised person has

contravened a relevant requirement imposed on the person, it may

impose on him a penalty, in respect of the contravention, of such

amount as it considers appropriate.”

2.
Relevant Regulatory Provisions

2.1
The relevant regulatory provisions as they were in force during the Relevant Period

include those set out below.

Principles for Businesses

2.2
The Principles are a general statement of the fundamental obligations of firms

under the regulatory system and are set out in the Authority’s Handbook. They

derive their authority from the Authority’s rule-making powers set out in the Act.

The relevant Principles are as follows:

2.2.1
Principle 6 (customers’ interests) which states:

“A firm must pay due regard to the interests of its customers and treat

them fairly.”

2.2.2
Principle 7 (communications with clients) which states:

“A firm must pay due regard to the information needs of its clients,

and communicate information to them in a way which is clear, fair and

not misleading.”

2.2.3
Principle 3 (management and control) which states:

“A firm must take reasonable care to organise and control its affairs

responsibly and effectively, with adequate risk management systems.”

Consumer Credit sourcebook

2.3
CONC is the specialist sourcebook for credit related activities, and it forms part of

the Handbook. The relevant provisions of CONC are as follows:

2.3.1
CONC 7.2.1R which states:

“A firm must establish and implement clear, effective and appropriate

policies and procedures for:

(1) dealing with customers whose accounts fall into arrears;

(2) the fair and appropriate treatment of customers, who the

firm understands or reasonably suspects to be particularly

vulnerable.”

2.3.2
CONC 7.3.2.G which states:

“When dealing with customers in default or in arrears difficulties a firm

should pay due regard to its obligations under Principle 6 (Customers’

interests) to treat its customers fairly.”

2.3.3
CONC 7.3.4R which states:

“A firm must treat customers in default or in arrears difficulties with

forbearance and due consideration.”

2.3.4
CONC 7.3.5G which states:

“Examples of treating a customer with forbearance would include the

firm doing one or more of the following, as may be relevant in the

circumstances:

(1) considering suspending, reducing, waiving or cancelling

any further interest or charges (for example, when a customer

provides evidence of financial difficulties and is unable to meet

repayments as they fall due or is only able to make token

repayments, where in either case the level of debt would

continue to rise if interest and charges continue to be applied);

(2) allowing deferment of payment of arrears:

(a) where immediate payment of arrears may increase

the customer's repayments to an unsustainable level;

or

(b) provided that doing so does not make the term for

the repayments unreasonably excessive;

(3) accepting token payments for a reasonable period of time

in order to allow a customer to recover from an unexpected

income shock, from a customer who demonstrates that

meeting the customer's existing debts would mean not being

able to meet the customer's priority debts or other essential

living expenses (such as in relation to a mortgage, rent,

council tax, food bills and utility bills).”

2.3.5
CONC 7.3.6G which states:

“Where a customer is in default or in arrears difficulties, a firm should

allow the customer reasonable time and opportunity to repay the

debt.”

2.3.6
CONC 7.3.8G which states:

“An example of where a firm is likely to contravene Principle 6 and

CONC 7.3.4 R is where the firm does not allow for alternative,

affordable payment amounts to repay the debt due in full, where the

customer is in default or arrears difficulties and the customer makes a

reasonable proposal for repaying the debt or a debt counsellor or

another person acting on the customer's behalf makes such a

proposal.”

2.3.7
CONC 7.3.9R which states:

“A firm must not operate a policy of refusing to negotiate with a

customer who is developing a repayment plan.”

2.3.8
CONC 7.3.14R(1) which states:

“A firm must not take disproportionate action against a customer in

arrears or default.”

Dispute resolution: Complaints sourcebook

2.4
DISP is the sourcebook for how complaints are to be dealt with by firms (amongst

others) and the Financial Ombudsman Service, and it forms part of the Authority’s

Handbook. The relevant provision of DISP is as follows:

2.4.1
DISP 1.3.1R which states:

“Effective and transparent procedures for the reasonable and prompt

handling of complaints must be established, implemented and

maintained by … a respondent…”

2.4.2
the Glossary of the Authority’s Handbook provides the following

definition for “complaint”:

“… any oral or written expression of dissatisfaction, whether justified

or not, from, or on behalf of, a person about the provision of, or failure

to provide, a financial service … which:

(a) alleges that the complainant has suffered (or may suffer)

financial loss, material distress or material inconvenience; and

(b) relates to an activity of that respondent … which comes

under the jurisdiction of the Financial Ombudsman Service.”

DEPP

2.5
Chapter 6 of DEPP, which forms part of the Authority’s Handbook, sets out the

Authority’s statement of policy with respect to the imposition and amount of

financial penalties under the Act.

The Enforcement Guide

2.6
The Enforcement Guide sets out the Authority’s approach to exercising its main

enforcement powers under the Act. Chapter 7 of the Enforcement Guide sets out

the Authority’s approach to exercising its power to impose a financial a penalty.