Toyota Financing Arm Fined $60 Million for Multiple Violations
Toyota Motor Credit ran a dead-end cancellation hotline, withheld refunds, and hurt consumers’ credit reports, the Consumer Financial Protection Bureau says.
Toyota's U.S.-based financing arm was fined $60 million Monday by a government consumer watchdog group for preventing auto buyers from canceling unwanted add-ons to their car loans, and other illegal practices.
The Consumer Financial Protection Bureau (CFPB) said that Toyota Motor Credit Corporation (TMCC) violated the Consumer Financial Protection Act and the Fair Credit Reporting Act by stopping borrowers from canceling product bundles that added to their car payments, withholding or issuing incorrect refunds, and falsely claiming that borrowers had missed payments — which hurt their credit reports.
After thousands of complaints by consumers, a CFPB investigation found that TMCC prevented consumers from canceling bundled coverage products, including Guaranteed Asset Protection and Credit Life and Accidental Health insurance, by making the process “unreasonably difficult.” Consumers who tried to cancel over the phone were sent to a hotline operated by employees whose job it was to dissuade cancellations, the CFPB said. About 118,000 consumer calls were routed to this hotline between 2016 and 2021, and consumers had to verbally request a cancellation three times before a TMCC employee would tell them that they could only cancel by sending a written request.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
TMCC also failed to refund, or issued incorrect refunds, for prepaid premiums to consumers who had paid off their loans or ended their leases early. Toyota's U.S.-based financing arm also falsely reported customer accounts as delinquent to consumer reporting agencies, even though the leased vehicles had already been returned.
Toyota Motor Credit is required to:
- Pay $48 million to consumers, including nearly $32 million to people who didn't receive refunds, $9.9 million to people who tried to cancel their coverage but weren't allowed to, $6 million to those whose credit was harmed by false reports sent to consumer reporting companies, and at least $52,000 to people who received the wrong refund when canceling their service agreements.
- Stop illegal practices, including paying employees based on their ability to get consumers to stay in bundled products. TMCC also has to make it easier for consumers to cancel coverage, monitor dealer partners who sell the add-ons to consumers, and let consumers know how they can cancel or remove the add-ons online or through the mail.
- Pay a $12 million fine to the CFPB’s victims relief fund.
"Toyota's lending arm illegally withheld refunds, made borrowers run through obstacle courses to cancel unwanted services, and tarnished their credit reports," CFPB Director Rohit Chopra said in a statement. "Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers."
What does the CFPB do?
The CFPB sends about 25,000 complaints about financial products or services to companies for a response each week, and most companies respond within 15 days. Consumers can submit complaints by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
Related Content
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.
-
Medicare Drug Plans Are Getting Better Next Year. Some Will Also Cost More.
Upcoming changes to the Part D drug benefit, including a $2,000 cap on out-of-pocket medication, will benefit millions of Americans. But higher premiums may also be on the way
By Susan Jaffe | KFF Health News Published
-
The Worst Credit Cards: Is One in Your Wallet?
If you have one of the worst credit cards, it's time to replace it with a winner. We can help.
By Kathryn Pomroy Published