On 11 April the National Consumer Tribunal ruled that Volkswagen Financial Services must refund, with interest, customers it charged for on-the-road, administration and handling service fees since 2007.
This ruling has raised the legality of installment agreements that consumers sign prior to taking delivery of vehicles bought from dealers (and other financing agreements for other products). The Tribunal said that Volkswagen Financial Services must stop charging consumers these fees and must submit a written confirmation that it had done so by 25 April. VW Financial Services is expected to challenge the Tribunal’s ruling in the High Court.
This is not the beginning of this issue. Way back in Oct 2017, the National Credit Regulator (NCR) issued a compliance notice to VW for charging consumers an on-the-road admin fee and handling fee on credit agreements. These fees are not permitted to be charged on credit agreements by the National Credit Act. The NCR compliance notice instructed Volkswagen Financial Services SA to refund consumers and submit an audit report to the NCR. VW blocked that by appealing. 18 months later the regulators have again caught up with VW. The problem here is that when consumer protection rules are put into question by large brands trying to avoid their responsibilities issues of consumer trust and fair competition are raised. This is not necessarily a problem of consumer education (as some claim), rather it is a failure of corporate governance and corporate responsibility.
In a paper, ‘A New Multilateralism for Shared Prosperity: Geneva Principles for a Green New Deal’, recently published by UNCTAD, the type of practices which VW has been found guilty of are labelled “crocodile capitalism”.