In response to allegations of deceptive practices levied against it by the Consumer Financial Protection Bureau (CFPB), Toyota Motor Credit Corporation, the lending division of Toyota, has reached a settlement worth $60 million. The CFPB ordered this payment as compensation and penalties for Toyota's alleged illegal scheme, which involved misleading customers into purchasing additional products that raised their monthly car loan payments and then making it challenging for them to cancel these products. This case highlights the importance of fair lending practices and transparency within the financial industry.

Purchase, Cancellation Issue

The Consumer Financial Protection Bureau (CFPB) has taken action against Toyota Motor Credit Corporation, ordering the company to pay a significant sum of $60 million in compensation and penalties. This penalty comes as a result of Toyota's involvement in an illegal scheme designed to prevent borrowers from canceling bundled product packages that increased their monthly auto loan payments.

The CFPB revealed that Toyota Motor Credit engaged in various deceptive practices, including withholding refunds or issuing incorrect refund amounts related to these bundled products. Moreover, the company knowingly damaged consumers' credit reports by reporting false information. The CFPB, in response to these violations, has mandated that Toyota Motor Credit cease its unlawful activities immediately. These information are according to a report by Autobody News.

As part of the penalties imposed, Toyota Motor Credit is required to allocate $48 million for compensation to consumers who were harmed by these practices. Additionally, the company must pay an additional $12 million as a penalty into the CFPB's victim relief fund.

The Director of the CFPB, Rohit Chopra, expressed his concern over Toyota's actions, stating that the company "illegally withheld refunds, made borrowers navigate obstacles to cancel unwanted services, and negatively impacted their credit reports." Particularly in light of the escalating financial burdens on American auto loan borrowers, he underscored the significance of holding major auto lenders accountable.

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Toyota Motor Credit Corporation, the United States-based financial subsidiary of Toyota Motor Corporation with its main office in Plano, Texas, is among the largest indirect auto lenders in the country.

With nearly 5 million customer accounts and assets exceeding $135 billion as of October 2022, its impact on the auto lending industry is substantial.

According to Reuters, the $60 million fine is a total from the $12 million in civil penalties and $48 million in restitution to car purchasers who have suffered financial harm dating back to 2016. Additionally, CFPB says that many borrowers told Toyota Motor Credit that dealers either lied about the necessity of these products or hurried through the paperwork to keep them from understanding the total cost.

Furthermore, the agency declared that Toyota Motor Credit made it difficult to cancel product bundles, with over 118,000 borrowers being directed to a hotline. They also said that agents discouraged cancellations and often didn't issue refunds. Additionally, the company was alleged to have falsely reported missed payments to credit agencies and delayed correcting negative information for over 27,500 borrowers.

Toyota's Response

Under a consent order, Toyota Motor Credit has agreed, without admitting or denying liability, to simplify the process of canceling unwanted product bundles. Furthermore, they will implement closer monitoring of dealers' behavior and ensure that employee compensation and performance evaluations are not linked to the sale of these bundles.

   

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