The UK's Financial Conduct Authority (FCA) has issued a £5.4m (€6.48m) penalty to Volkswagen Finance for mistreating borrowers between 2017 and 2023.
In a statement on Monday, the FCA added that the financial unit of the German car maker would also have to pay £21.5m (€25.81) in redress to around 110,000 customers.
"Volkswagen Finance made tough personal situations worse by failing to consider what those in difficulty might need," said FCA senior official Therese Chambers.
The watchdog added that, in some cases, Volkswagen had confiscated cars from vulnerable customers "without considering other options".
"This risked people being put in a worse position, particularly if they relied on their car to travel to work," explained the FCA.
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The investigation found that advisers displayed a lack of empathy during calls, in one or more instances laughing at mistakes and failing to offer apologies.
Following the FCA's involvement, the Volkswagen unit has made improvements to its customer service and communications, a statement on Monday said.
The FCA has fined banks such as HSBC, Barclays, Lloyds and TSB in recent years for failing to provide adequate customer support.
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