Volkswagen Financial Services · DRN-6274704

The complaint Mr P complains that Volkswagen Financial Services (UK) Limited (‘VWFS’) initially approved, and subsequently declined, his application to refinance of a balloon payment. What happened The detailed background to this complaint is well known to both parties. So, I’ll only provide a brief overview of some of the key events here. Mr P entered into a hire purchase agreement with VWFS for a car, which was due to end with a balloon payment. As the agreement approached its end Mr P applied to refinance the balloon payment and says this was approved and completed in August 2024. VWFS says that while the refinance application was initially approved it was not fully completed as further steps were required and so no new agreement was activated. It later treated the original agreement as outstanding and issued communications about arrears and the need to repay the balloon payment. Mr P was upset and said he was not told that the refinance had been cancelled and believed payments would be taken automatically by direct debit. He said he only became aware something was wrong when he was contacted about the outstanding balance which caused him distress and financial difficulty. After Mr P referred his complaint to this service VWFS accepted they didn’t clearly notify Mr P that the refinance application had not been completed. They accepted this was an error and they offered to remove any adverse credit information relating to the balloon payment and to pay £350 compensation for the distress and inconvenience caused. Our investigator thought that was reasonable, but Mr P didn’t think it was sufficient compensation and he asked for a decision by an ombudsman. What I’ve decided – and why I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. I agree with the investigator’s view of this complaint, for broadly the same reasons. Where the information I’ve got is incomplete, unclear, or contradictory, as some of it is here, I have to base my decision on the balance of probabilities. I’ve read and considered the whole file, but I’ll concentrate my comments on what I think is relevant. If I don’t comment on any specific point, it’s not because I’ve failed to take it on board and think about it but because I don’t think I need to comment on it in order to reach what I think is the right outcome. I have taken into account the relevant law and regulations, the terms of the agreement, and

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what I considered to have been good industry practice at the time. It is not in dispute that VWFS made an error in how they handled Mr P’s refinance application. In particular, they did not make it sufficiently clear to him that the application had not been completed and that no new agreement had come into force. They ought to have clearly communicated this to Mr P at the time, and their failure to do so was a shortcoming in the service they provided. However, I must also consider what the position would have been if that error had not occurred. The evidence shows that although the application was initially approved, it was not finalised and would have required further assessment before any lending was completed. VWFS were not obliged to provide the refinance, and I can’t safely conclude that Mr P would have been offered or accepted for a completed refinance agreement in any event. I’ve thought about whether Mr P suffered a financial loss as a result of what happened. While I accept that the situation he found himself in was difficult, the outstanding balloon payment remained due under the original agreement. Refinancing would have meant taking on further credit rather than removing that liability. In those circumstances, I’m not persuaded that the error caused Mr P financial loss. I do accept that VWFS’s failure to notify Mr P properly caused him distress and inconvenience. I also accept that receiving communication about arrears, debt collection and the possibility of repossession would have been upsetting, particularly where Mr P believed arrangements were in place. I have thought carefully about whether Mr P could reasonably have taken steps to identify that payments weren’t being made and to reduce the impact of what happened. While I accept that he expected payments to be collected, I think it would have been reasonable for him to have been aware, over time, that no payments were leaving his account and to have made enquiries about that. I think that’s important when assessing the overall impact of VWFS’s error. Taking everything into account, including the error by VWFS, the impact on Mr P, and the extent to which that impact could reasonably have been reduced, I’m satisfied that compensation for distress and inconvenience is appropriate. I’m also satisfied that VWFS’s offer to remove any adverse credit information relating to the balloon payment is fair. In the circumstances, I consider that the offer of £350 compensation is a fair and reasonable reflection of the distress and inconvenience caused by VWFS’s error . My final decision For the reasons I’ve given above, I uphold this complaint in part and tell Volkswagen Financial Services (UK) Limited to pay Mr P £350 to compensate him for the distress and inconvenience they’ve caused him. They should also arrange to remove any adverse information they may have reported to Mr P’s credit file in relation to this issue. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr P to accept or reject my decision before 26 May 2026. Phillip McMahon Ombudsman

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