Today’s FCA Final Notice to Volkswagen Financial Services (UK) Limited leaves little doubt that VWFS made some major errors in its collections activities for vulnerable customers. But is the Final Notice - the only publicly available information - as clear as it could be?
The general picture painted by the FCA is that VWFS had all the gear (perfectly compliant collections policies) but no idea (in real life, procedures falling far short of the policies).
There are indications in the Final Notice that the FCA’s write-up of this might be slightly weighted to fit the conclusion, rather than being a fully balanced explanation of the circumstances. For example:
A table shows the results of 100 file reviews conducted by an unnamed regulatory consultancy. Out of 100 files reviewed, 51 had Fair outcomes, 29 had Fair outcomes with learning points, and 20 had Unfair outcomes. The FCA states that in its view, if an outcome is graded ‘Fair with learnings’ than it must involve unfair treatment of customers. The FCA does not attempt to explain that view, but just in case of any uncertainty, it sets out a revised table showing that 49% of files had unfair customer treatment, not 20%.
The FCA finds that a lack of ‘flags or records’ to identify vulnerable customers, ‘rendering VWFS’s ability to ensure vulnerable customers were provided with the support required on each contact materially ineffective’. The FCA does however suggest there were system notes showing the customer’s circumstances. In some firms, system notes can be very effective, providing the advisers with more background and context than a flag could. It is unclear whether the FCA reviewed the system notes and the extent to which advisers were trained to use them.
As a consequence of the lack of vulnerability flags, advisers were not guided to use an affordability assessement, and advisers often relied on a simple verbal confirmation from a customer that an arrangement was affordable, without any further information or probing, the FCA states. Affordability checks were completed only after a payment arrangement had broken. Without an affordability check, customers will often offer a lower rather than higher payment. Some firms accept this, because the arrangement is less likely to break (good for both the customer and the lender), and if they insist on carrying out affordability the customer will often end the call. It would be useful to know whether VWFS was accepting modest payments, arguably more generous to customers, and on that basis felt able to accept a verbal confirmation.
The lack of the use of flags also meant that accounts were not required to be handled by a specialist collections team dealing with vulnerable customers. In some firms, all advisers are trained in dealing with vulnerabilities, with only more unusual cases being passed to a specialist team, and this can deliver strong consumer outcomes. It’s unclear whether the FCA considers that only specialist teams should handle vulnerable customers, or whether this was specific to VWFS.
This is not to suggest that the FCA’s actions here are wrong, simply that we may not have the full picture (to be clear, I have no information other than the Final Notice and no knowledge of VWFS). There’s plenty of other evidence of issues in the Notice, particularly around communication strategies. But if other firms across the consumer credit industry are to learn from the mistakes made, some more context to the FCA’s findings would be valuable.
If you have found this blog useful please take a look at my recent publications include the third edition of the A to Z of Leasing and Asset Finance and my 2024 reports for Apex Insight on the Used Car Finance Market and Non-Prime Consumer Credit.
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