The FSA rules, which tighten regulations on the sale of insurance and warranty services means the VAG group is turning away customers wishing to renew the cover on their cars beyond the original three-year warranty period.
About 80,000 car owners may potentially be affected by the problem, which VAG says it is trying to resolve.
Under the rules, firms selling extended warranties in Britain must register with the Financial Services Authority. The move aims to ensure that customers are properly informed and that sellers maintain records to prove they have followed the correct procedure.
VAG refused to say in what way it had failed to comply with the regulations. It is hoping to offer “an alternative warranty product within the next 10 to 14 days”, but did not give details. Owners have been advised to contact the customer care departments of their respective brands.
The problem does not affect other VAG warranties, such as those first issued on new cars and those covering used cars sold under manufacturer-approved used car schemes.