Toyota’s in-house financing unit is being hit with $60 million in fines and restitution in an effort to settle charges from the Consumer Financial Protection Bureau that it illegally prevented borrowers from canceling product bundles – resulting in higher monthly car loan payments. Toyota Motor Credit will have to pay a $12 million civil fine and $48 million to customers it wronged, according to a statement from the CFPB.
The U.S.-based auto finance company was in the habit of offering products – typically costing between $700 and $2,500 per loan – that offer protection when a vehicle is stolen, damaged or needs parts and service after a warranty expires, and when the borrower dies or becomes disabled. Lovely. The CFPB says thousands of customers using Toyota Motor Credit were lied to by dealers about whether these products were mandatory, or they rushed paperwork so folks wouldn’t realize how much they were actually paying.
The regulator also said Toyota Motor Credit – one of the largest indirect auto lenders in the U.S., with nearly five million customer accounts and over $135 billion in assets – would make it “extremely cumbersome” to cancel the bundles, failed to provide refunds to customers who did actually manage to cancel and tarnished credit reports by falsely claiming that the borrowers had missed car payments – something they did not actually do.
Along with the monetary penalty, Toyota Motor Credit is now prohibited from tying employee compensation or performance measurements to consumers’ retention of bundled products. TMC must also make it easy for consumers to cancel unwanted coverage, monitor auto dealers for the imposition of these products without consent from comers and inform consumers who have these products of their ability to remove them online or in writing.
Toyota Motor Credit did not admit or deny liability in agreeing to settle, Reuters reported. I cannot imagine why creditors are so disliked. I really cannot.
“Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers,” Rohit Chopra, CFPB, said in a statement.
Update: Toyota has reached out with a comment: “Toyota Motor Credit Corporation (TMCC) is committed to doing what’s right for our customers and strives to consistently follow all federal and state laws in our sales, customer service, and administrative practices. We are dedicated to ensuring we demonstrate our core value of “Respect for People” in every aspect of our relationship with customers. TMCC admitted to no wrongdoing but agreed to the terms of the consent order with the Consumer Financial Protection Bureau (CFPB) to fulfill our commitment to continually provide ever-better service to our customers. In most instances, TMCC has already addressed the areas of concern cited by the Bureau. We will continue to enhance our practices to deliver the best possible customer experiences.”