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.
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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).
