The Consumer Financial Protection Bureau (CFPB) has announced that Toyota Motor Credit, the credit arm of Toyota, has been ordered to pay a $60 million penalty for engaging in deceptive practices that affected numerous consumers. According to the CFPB, Toyota Motor Credit misled customers into purchasing unnecessary products and made it excessively difficult for them to cancel these services.
Complaints from numerous borrowers alleged that Toyota Motor Credit added extra products to their loans, resulting in fees for the company at the expense of consumers. Furthermore, the company was found to have created obstacles for consumers seeking to cancel these services.
As part of the settlement, Toyota Motor Credit did not admit any wrongdoing but agreed to pay $32 million to consumers who did not receive owed refunds, $9.9 million to consumers unable to cancel their policies, $6 million to those harmed by false information sent to consumer reporting companies, and $52,000 for individuals who received inaccurate refunds. Additionally, the company will pay a $12 million penalty to the CFPB’s victim relief fund.
The CFPB today ordered Toyota Motor Credit Corporation to pay $60 million in consumer redress and penalties for operating an illegal scheme to prevent borrowers from cancelling product bundles that increased their monthly car loan payments. https://t.co/aHdekhqeoK
— consumerfinance.gov (@CFPB) November 20, 2023
The CFPB revealed that Toyota Motor Credit established a frustrating hotline for customers wishing to cancel extra products, with customers being required to request cancellation three times via phone before being informed that the only way to cancel was through a written request. Over 118,000 customers called this hotline from 2016 to 2021.
In addition to the financial penalties and restitution, Toyota Motor Credit is required to streamline the cancellation process for unwanted coverage, inform consumers of online or written cancellation options, and monitor dealers to prevent unauthorized additions of products to customer loans. The company is also prohibited from linking employee compensation or performance metrics to consumer retention of bundled products.
The unnecessary products included Guaranteed Asset Protection, Credit Life and Accidental Health coverage, and vehicle service agreements, with average costs ranging from $700 to $2,500 per loan.
The CFPB also noted that Toyota Motor Credit knowingly provided false information to rating agencies, negatively impacting customers’ credit scores by inaccurately reporting missed payments for leased vehicles that had actually been returned.
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