VOLKSWAGEN FINANCE ARM POSTS £352.9M LOSS OVER UK MOTOR FINANCE REDRESS

Volkswagen Financial Services UK has reported a £352.9m loss for 2025, after setting aside £725m to cover expected costs under the Financial Conduct Authority's industry-wide motor finance redress scheme, according to the company's newly filed accounts. The provision reverses a £110.3m profit recorded the previous year. The firm said that without the writedown, profitability would have risen, pointing to revenue growth to £3.41bn from £3.14bn. VWFS said its provision reflects criteria set out in the FCA's policy statement, but argued the rules do not adequately address how the scheme applies to a "captive finance provider" such as itself, which operates as the financial subsidiary of a parent manufacturer.

VWFS, along with the finance arms of Mercedes-Benz and CA Auto Finance, has launched a legal challenge against the FCA's redress scheme, arguing it wrongly assumes most customers suffered financial loss where commissions were not clearly disclosed. The Volkswagen group said in its accounts that it supports redress for customers who were "genuinely disadvantaged" but believes the scheme's application to captive lenders requires independent consideration, noting that some customers paid less because their finance was backed by a VW group brand partner. The dispute follows a Supreme Court ruling last year that partially overturned an earlier judgment, rejecting claims that hidden commissions were automatically unlawful, while finding that one customer's undisclosed commission created an "unfair relationship". That finding left scope for the FCA to proceed with an industry-wide redress scheme.

The FCA published final details of its scheme in March, reducing the industry's estimated overall bill to just over £9bn from an earlier estimate of £11bn. Opponents of the scheme have been pressing the regulator to release its communications with the Treasury and its modelling data for the programme, according to reporting this week. The legal challenge from VWFS and other captive lenders remains ongoing.