Volkswagen Financial Services (UK) Limited · DRN-6227716

The complaint Mr B complains about the quality of a new car he acquired through a Hire Purchase Agreement (HPA) financed by Volkswagen Financial Services (UK) Limited trading as Skoda Financial Services (Skoda). Mr B’s also unhappy with Skoda’s offer to put things right after they incorrectly processed a voluntary termination (VT) and ended his agreement. What happened Around September 2024, Mr B acquired a new car. The cash price of the car was £41,156.30. Mr B made an advance payment of £2,551, with the remaining £38,605.30 provided as finance through the HPA with Skoda. The HPA required Mr B to make 47 monthly repayments of £589.89 followed by a final repayment of £18,090. Mr B says on the day he collected the car the infotainment system wouldn’t operate. He says the issue needed to be investigated by an engineer for around two hours and he was given a bottle of champagne by way of an apology. Later, Mr B experienced an issue with the car’s electric sunroof not closing after having been opened. An engineer looked at the issue but was unable to identify a fault and he was asked to monitor it. Mr B says he then started experiencing more serious faults. He says the car’s emergency brake would intermittently activate despite not being needed, causing safety issues for him when driving. Mr B also says that on occasions the car would completely fail to turn on, with multiple warning lights illuminating on the dash. The car was seen by the dealership several times, but on each occasion no fault could be found. In May 2025, Mr B complained to Skoda. Towards the end of that month, Mr B asked to reject the car, however, Skoda misunderstood his request and ended his agreement as it having been VT’d. As a result, his direct debit was cancelled, he was asked to pay the outstanding balance of around £17,000 and adverse data was recorded against his credit file. In August 2025, after Mr B had asked the Financial Ombudsman Service to look into things, Skoda sent him their final response. They upheld Mr B’s complaint in part, apologising for the processing of the VT and the delays in them responding to his complaint. Skoda said Mr B’s HPA would be reinstated, they would arrange for any adverse data to be removed, and he should arrange to settle the arrears. Skoda also agreed to pay £250 compensation. But Skoda said the faults Mr B reported had been unable to be replicated so they didn’t uphold his complaint regarding the quality of the car. They also said the delay in the dealership being able to look into things and the initial lack of a courtesy car was, as the lender, outside of their control. After considering things further, Skoda made Mr B a further offer to settle the complaint.

-- 1 of 9 --

They agreed to keep the HPA closed, waive the VT amount previously they said was due, waive any early termination fees, remove any adverse data and increase their offer of compensation to £350. Skoda said this wasn’t due to the quality of the car, rather due to the error in processing VT. One of our Investigators looked into things and said he thought Skoda’s offer was fair. He said without any material evidence of a fault, he wasn’t persuaded there was anything wrong with the car supplied and the offer to put things right was reasonable. Mr B rejected Skoda’s offer and disagreed with our Investigator’s view. He said critical evidence of the faults with the car had been ignored and the dealership’s investigation into the faults was inadequate. Mr B also said given the severe detriment of Skoda’s incorrect processing of the VT towards him and their failure to prevent ongoing harm by not removing the adverse data, means the compensation offered is grossly inadequate. Because a resolution couldn’t be reached, this complaint has come to me to decide. I sent both Mr B and Skoda my provisional decision on 5 March 2026. I explained I thought Mr B’s complaint should be upheld in full and that Skoda needed to do more to put things rights. In my provisional decision I said: I’ve considered all the available evidence and arguments to decide what’s fair and reasonable in the circumstances of this complaint. Having done so, I think this complaint should be upheld in full and what I think Skoda need to do to put things right, also differs from that what has previously been offered. So, my decision here will be provisional, giving both sides a chance to comment before I make my final decision. I’ll explain my reasons below. But first, I’m aware I’ve summarised this complaint in far less detail than has been provided, and I’ve done so using my own words. No discourtesy is intended by this. Instead, I’ve concentrated on what I think are the key issues here. Our rules allow me to do this. This reflects the nature of our service as an informal alternative to the courts. If there’s something I’ve not mentioned, it isn’t because I’ve ignored it. I haven’t. I’m satisfied I don’t need to comment on every detail or address every point to be able to reach what I think is the right outcome in the circumstances of this complaint. Where evidence is incomplete or inconclusive (as some of it is here), I’ve reached my decision on the balance of probabilities, deciding what I consider most likely to have happened in light of the evidence and testimony that is available and the circumstances of this complaint as a whole. As I’ve explained, I consider Mr B’s complaint to consist of two main concerns, the quality of the car and Skoda’s incorrect processing of VT, alongside their handling of the matter which followed. I’ll address each point in turn. Quality of the car As this complaint concerns the quality of goods, in this case a car, supplied through a regulated HPA Mr B entered into, I’m satisfied this is a complaint point we can consider. In considering what’s fair and reasonable, I need to have regard to the relevant law and

-- 2 of 9 --

regulations. The Consumer Rights Act 2015 (CRA) is relevant to this complaint. It says that under a contract to supply goods, there is a statutory right for the goods to be of satisfactory quality. To be considered satisfactory, the goods would need to meet the standard that a reasonable person would consider satisfactory – taking into account any description of the goods, the price and all other relevant factors. Here, Mr B acquired a new car at a cost of around £41,200. So, I think a reasonable person would not expect to find any defect or faults for some time and for the car to continue to be both free from any major defects and would expect trouble free motoring for a significant period of time and distance. From the detailed testimony and supporting documentation provided by Mr B, he says he has experienced faults with the car from the outset – those faults primarily being the cars infotainment system not working, the sunroof failing to close and the electrics causing the car’s emergency braking system to activate and on occasions fail to start. While Skoda say there’s no maintenance record or service history regarding the infotainment system fault, Mr B says this was resolved by an engineer on the day of collection and that he was offered champagne by way of an apology. I’ve no reason to doubt Mr B’s testimony here, and having looked at the customer notes provided, I can see he was provided champagne as he described. Based on the limited information available to me, I am persuaded there was a fault with the infotainment system and that the fault was resolved promptly on the day of collection. Regarding the sunroof issue, I can see an engineer looked into things but found no relevant fault when it was tested. Mr B was asked to monitor for any recurrence of the issue, but I can’t see that it was raised again. Finally, I can see Mr B raised his concerns about the application of the emergency brake unexpectedly activating when not needed and the illumination of warnings on the dash, on at least four separate occasions between April 2025 and August 2025. He says the car was seen by roadside assistance of multiple occasions, providing one report from August 2025 which clearly states – ‘Brakes faulty. SOS, please visit workshop’ and ‘Same issue as before, ongoing problem’ I’m aware Skoda say upon investigation no fault was found, nor were any repairs performed but Mr B raises concerns about the level of investigation carried out when looking to detect an intermittent fault such as what he was experiencing, providing ‘trip details’ for the period during which the car was being looked at, which showed a distance of just one mile had been covered. I’ve thought about everything carefully here and I think its clear further investigation was required. I say this because Mr B says while the car was at the dealership, he was told the issue was ‘fixed’ but that a safety test drive was required. But he says after contacting Skoda for advice, he was told he could not consent to it as the VT had been processed. Skoda’s own final response says while having initially declined, Mr B subsequently agreed to participate in a supervised road test, however as they then went on to offer to end his HPA, I’m not sure any further tests took place. Ultimately having weighed up the evidence available, it’s clear Mr B experienced issues with

-- 3 of 9 --

the car which prompted him to require roadside assistance and to contact Skoda on at least four occasions. So, while I acknowledge the dealership were unable to find a cause for the issues being experienced, I’m not persuaded that meant a fault didn’t exist. I think on balance, it more likely than not did. And I don’t think it’s reasonable for Mr B to have been experiencing these kinds of faults with a new vehicle. Instead, I think what he describes, what he reported to Skoda and what is stated on the roadside assistance report, persuades me the vehicle was not of satisfactory quality when it was supplied to him. Having reached this finding, I’ve now thought about the impact the faults with Mr B’s vehicle had on him and what Skoda should do to put things right. From what I can see, Mr B made his repayments towards the HPA until 30 May 2025, after which the direct debit had been stopped due to Skoda processing the VT. Up until April 2025, when I can first see Mr B brought the brake issue to Skoda’s attention, I’m satisfied he had fair use of the vehicle, so I think it’s also fair he should meet his payments towards the agreement in full until this point. But by the point at which he’d made his payments for April and May 2025, I’m satisfied on balance that the car’s emergency braking system, more likely than not wasn’t working as it should have been expected to have worked, and I can understand the distress and inconvenience Mr B says this caused him. During the time for which he made those two payments, I’m persuaded Mr B wasn’t in possession of a car of the quality he should reasonably have expected to have received and says on some occasions due to the car not starting he had to make alternative travel arrangements or was without a car completely when a courtesy car wasn’t provided. So, I don’t think it’s fair he should meet his payments towards the agreement in full for those two months. I think in the circumstances it’s fair that Skoda refund Mr B 15% of each of the monthly repayments made by him for this period, reflecting the impaired used he was subjected to. I understand that prior to Skoda offering to collect the car and leave the agreement as being terminated, further investigations in the form of test drives and supervised road tests were being discussed. Based on the developments since then and the findings I’ve explained above, I think further investigations now would be neither practical, nor reasonable. I also don’t think repair at this stage should a fix to prevent the issues from recurring be found is suitable given the circumstances. Rejection is also one of the remedies available to Mr B under the CRA, I instead consider it fair and reasonable for Skoda to take back the car as they planned already to do. But I think this should be treated as rejection, not as a termination, regardless of Skoda waiving any fees or charges that might come with that. I will set out exactly what I think Skoda need to do to put things right towards the end of this decision. I’ve also thought about Mr B’s claim for an arrears amount he paid towards the courtesy car in September 2025 and that he’s been without a car at all since then, forcing him to rely on alternative transport at his own cost. Having done so, I don’t think Skoda need to do anything to put things right here. I say this because from the evidence I’ve seen, Mr B’s repayments towards the agreement stopped after the payment made on 30 May 2025. So, during the time in question, while he might have incurred additional expenses, he wasn’t

-- 4 of 9 --

paying for the agreement the car was the subject of. VT and service concerns Skoda processed VT incorrectly and have acknowledged that, so it isn’t in dispute that an error occurred here. They’ve offered to pay Mr B £350 compensation. While our Investigator felt Skoda’s offer was fair, Mr B disagreed. I’m currently minded to agree with Mr B. Mr B has explained how Skoda’s error has impacted him severely and continues to cause him ongoing harm. In summary, he has said: • Skoda’s actions have had a direct impact on his physical health, • he’s been denied credit for essential home appliances and was put under real threat of losing his home as a result of the negative data Skoda recorded, • he was unable to secure another car due to the negative data Skoda recorded, and, • Skoda have failed to address the negative data, causing him continued harm. When considering compensation for distress and inconvenience, it’s important to say while I’ll now look to briefly address each point, when deciding what I consider fair and reasonable, I’ve reached the figure I have, looking at everything collectively and in the whole. After Skoda processed VT, Mr B was told he owed in excess of £17,000. I’m in no doubt that this alone would have caused Mr B a great deal of worry and distress. But then further, when the disputed payment understandably wasn’t made, missed payment markers were applied to Mr B’s credit file. Mr B has explained that he was denied credit as a result of the adverse data. He has shown me he was declined eligibility for a credit card via two credit brokers with one indicating it could be due to his credit history. He’s also evidenced he was declined credit to finance a boiler replacement, something that caused him a great deal of stress as it left him and his family without heating or hot water for over four weeks. In addition, Mr B has shown his mortgage was due for renewal around the time which he says placed him under a great amount of distress, concerned that if he could not secure a new rate, he’d be unable to afford the repayments towards his family home. I can’t be certain that the issues Mr B faced were solely due to the adverse data recorded by Skoda, but having thought about everything, I don’t think that matters in the circumstances here. Mr B’s credit file would in no doubt have been impacted in some respect by the adverse data Skoda recorded and I think it’s understandable their actions would’ve caused him a great deal of both distress and inconvenience. I can see he went to some lengths to try and mitigate the impact Skoda’s actions had on him by raising the issue with them several times and obtaining written confirmation from his bank that the direct debit towards the HPA had not been cancelled by him, that he had sufficient funds in his account to have made the payments and that instead, the merchant (Skoda) had not tried to take the funds. Mr B also explained that the distress and inconvenience caused to him had impacted his

-- 5 of 9 --

health, providing evidence that when seeking medical treatment, he raised that the stress his dispute with Skoda was, at least in part, contributing to his medical concerns. I’m not a medical expert but the medical advice provided concluded Mr B’s health concerns were likely stress related and for the reasons I’ve already explained, I’m persuaded that it’s understandable the impact of Skoda’s error would likely have added a great deal to the stress he says he was under. Finally, my understanding is that the adverse data recorded against Mr B remains on his credit file. Skoda have let our service know he remains unhappy with his credit file but that they are unable to amend or update it until this complaint concludes. But I disagree this ought to be the case here. Skoda have said this is their standard process, but from as early as August 2025, Skoda upheld the element of Mr B complaint concerning the incorrect processing of VT, advising him that they would ensure any adverse data reported is removed. While I acknowledge Mr B didn’t accept the redress offer Skoda proposed, ultimately as Mr B’s agreement ought never to have been VT’d, nor did he cancel his direct debit resulting in the missed payments, I think this is something Skoda ought to have looked to put right without further delay, regardless of whether other elements of his complaint remained in dispute. In summary, I’m persuaded Skoda’s error caused Mr B considerable distress and inconvenience for a pro-longed period of time and I think directing Skoda to pay £600 compensation is fair and reasonable, having considered all of the circumstances of this complaint in the whole here. I’ll now set out what I think Skoda should do to put things right. Putting things right As I’ve said, I think Skoda need to do something differently to what our Investigator said they should do in order to put things right. In order to resolve this complaint, I think Skoda should: • ensure the agreement is ended with nothing further to pay; • arrange collection of the car, if not already done, without delay and without any cost to Mr B; • remove any adverse data applied to Mr B’s credit file in relation to the agreement; • refund the deposit of £2,551 paid by Mr B; • as Mr B had impaired use of the car during April and May 2025, refund 15% of each of the monthly repayments made by him for this period; • Add interest at 8% simple per year on all payments refunded to Mr B from the date of each payment until the date of settlement. HM Revenue & Customs requires Skoda to deduct tax from the interest payment referred to above. Skoda must give Mr B a certificate showing how much tax it’s deducted if he asks them for one. Finally, as Mr B has incurred distress and inconvenience as a result of Skoda’s actions, I

-- 6 of 9 --

consider it reasonable for them to make an increased compensation payment to fairly reflect the impact it has had on him. So, I think Skoda should also: • Pay Mr B £600 in compensation for distress and inconvenience. Skoda accepted my provisional decision, but Mr B rejected it. Mr B said while he welcomed the increase in compensation, the sum did not cover the actual financial loss he is suffering as a result of Skoda’s actions. Mr B provided evidence he says shows credit refusals and rate hikes were solely due to Skoda’s error which included: • a 0% credit card being declined, resulting him having to take credit to finance a boiler at a higher rate, • being denied access to a lower fixed mortgage rate, resulting in him paying a higher monthly repayment, and, • a current account being declined. 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. Neither Mr B nor Skoda disputed my findings on the quality of the car, so I won’t discuss that further here. I’ll focus on what remains in dispute. I’d like to thank Mr B for taking the time to respond to my provisional decision in the detail. I’d like to reassure him I’ve carefully considered everything he’d said. Having done this, while I understand he will be disappointed, I’ve not been persuaded to change my findings and therefore my final decision remains along the same lines as my provisional decision. I’ll explain why. Mr B has provided a copy of his credit report which shows the only visible adverse data recorded is by Skoda. When looking at the credit broker screen shot provided which says he is ineligible to apply for a credit card, while it does say this could be because of his credit history, it also refers to other possible reasons such as problems with the application form. I’ve not seen anything to show me Mr B queried this further with them. Mr B was then declined for credit when looking to finance a boiler replacement however he was later accepted. The initial quote refers to a price of £2,500 but this is for the work that was to take place not for the cost of the finance and doesn’t show a monthly amount he would have been due to pay. The finance Mr B was later accepted for quotes a price of £2,760, but again this appears to be for the work being carried out. Even if I was persuaded the decline of the first finance search was solely due to Skoda’s error, I don’t think it’s reasonable for me to conclude Skoda should be to blame for the cost of the work increasing. I’ve not seen anything to show me Mr B’s declined attempt to obtain finance had an impact on the price of the work. And even if this was the case, I can’t say it

-- 7 of 9 --

was a reasonably foreseeable result of Skoda’s error. Finally, I’ve considered Mr B concern about having been forced onto a significantly higher interest rate when re-mortgaging. Mr B has provided a switch re-mortgage rate showing a two-year fixed rate of 3.79% but I’ve not seen anything to show me he was denied accessing this rate. The rate in question I can see carries a booking fee of £999. This appears to be the provider’s standard offering which carries a slightly lower rate in comparison to saver offerings that carry no booking fee but instead carry slightly higher interest rates. Looking at the provider’s deals available in today’s market, the difference in interest rate between their standard and saver offerings, is around the same as the difference Mr B has shown. In addition, when looking at the mortgage illustration Mr B has provided, there are no ‘costs to be paid on a one-off basis’ listed which I think suggests more likely than not, the rate he has secured doesn’t carry the standard rate booking fee the provider charges. In summary, I’m in no doubt Skoda’s error has caused Mr B distress and inconvenience in the manner which I’ve previous set out. But, while I thank him for taking the time to respond to my provisional decision, I remain satisfied £600 compensation to reflect this is fair and reasonable considering all the circumstances of this case. Putting things right For the reasons I’ve explained, my decision is to uphold Mr B’s complaint. To put things right, Skoda should: • ensure the agreement is ended with nothing further to pay; • arrange collection of the car, if not already done, without delay and without any cost to Mr B; • remove any adverse data applied to Mr B’s credit file in relation to the agreement without delay; • refund the deposit of £2,551 paid by Mr B; • as Mr B had impaired use of the car during April and May 2025, refund 15% of each of the monthly repayments made by him for this period; • Add interest at 8% simple per year on all payments refunded to Mr B from the date of each payment until the date of settlement. HM Revenue & Customs requires Skoda to deduct tax from the interest payment referred to above. Skoda must give Mr B a certificate showing how much tax they’ve deducted if he asks them for one. Finally, as Mr B has incurred distress and inconvenience as a result of Skoda’s actions, I consider it reasonable for them to make an increased compensation payment to fairly reflect the impact it has had on him. So, I think Skoda should also: • Pay Mr B £600 in compensation for distress and inconvenience.

-- 8 of 9 --

My final decision My final decision is that I uphold Mr B’s complaint and instruct Volkswagen Financial Services (UK) Limited trading as Skoda Financial Services to put things right as I’ve set out above. Under the rules of the Financial Ombudsman Service, I’m required to ask Mr B to accept or reject my decision before 13 April 2026. Sean Pyke-Milne Ombudsman

-- 9 of 9 --