The auto-financing arm of carmaker Toyota agreed to pay $60 million as part of a settlement with the Consumer Financial Protection Bureau (CFPB) addressing allegations of illegal lending and credit reporting misconduct.
Toyota Motor Credit Corp. was fined $12 million and must pay nearly $48 million in consumer redress, the CFPB announced in a press release Monday.
The details: Toyota Motor Credit was accused of making it unreasonably difficult for consumers to cancel unwanted add-ons, failing to ensure consumers received refunds for certain add-ons that had become void, failing to provide refunds to consumers who canceled their vehicle service agreements, and not timely correcting false information provided to consumer reporting agencies when consumers returned their leased vehicles, according to the CFPB’s order.
When fielding consumer complaints regarding product bundles, Toyota Motor Credit would direct the individuals to a “retention hotline” designed to dissuade cancellations, according to the CFPB. The hotline, which received more than 118,000 calls from 2016-21, would result in a dead end for consumers, as representatives would tell them they could only cancel by written request if they insisted, the agency said.
“Toyota’s lending arm illegally withheld refunds, made borrowers run through obstacle courses to cancel unwanted services, and tarnished their credit reports,” said CFPB Director Rohit Chopra in the agency’s release. “Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers.”
Compliance considerations: As part of the settlement, Toyota Motor Credit can no longer tie employee compensation or performance measurements to consumers’ retention of bundled products.
The nearly $48 million in redress the company must pay will be split among four different groups, with nearly $32 million going to consumers who did not receive refunds on certain unearned premiums.
The company agreed to implement a compliance plan within 60 days to carry out the requirements of the CFPB’s order.
Company response: “[Toyota Motor Credit] admitted to no wrongdoing but agreed to the terms of the consent order with the [CFPB] to fulfill our commitment to continually provide ever-better service to our customers,” said the company in an emailed statement. “In most instances, [Toyota Motor Credit] 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.”