In a significant development, Toyota’s U.S.-based auto financing unit, Toyota Motor Credit, has agreed to pay $60 million in fines and restitution to settle charges brought by the Consumer Financial Protection Bureau (CFPB). The charges allege that the company engaged in illegal practices that prevented borrowers from canceling product bundles, resulting in increased monthly car loan payments.
The settlement, announced on Monday, includes a $12 million civil fine and $48 million designated for consumers who were adversely affected by the company’s actions.
Toyota Motor Credit, responsible for providing financing to individuals purchasing vehicles at Toyota dealerships, also offers additional products that come at a cost ranging from $700 to $2,500 per loan. These products provide protection in various scenarios, such as vehicle theft, damage, post-warranty parts and service needs, and in unfortunate events like the borrower’s death or disability.
According to the CFPB, numerous consumer complaints were lodged against Toyota Motor Credit, alleging deceptive practices by dealers. Consumers claimed that they were misled into believing that the purchase of these protection products was mandatory, or that paperwork was rushed to obscure the actual costs involved.
The regulator further asserted that Toyota Motor Credit made the cancellation process for these bundles overly complicated, failed to issue refunds to those who did manage to cancel, and, in some instances, falsely reported missed payments on borrowers’ credit reports.
Despite the substantial settlement amount, Toyota Motor Credit did not admit or deny liability as part of the agreement. The company has not yet responded to requests for comments on the matter.
This settlement underscores the importance of transparency and fair practices within the auto financing industry. The CFPB’s action aims to protect consumers from deceptive practices, ensuring that borrowers are well-informed about the terms and costs associated with their auto loans and related products.
It remains to be seen how this settlement will impact Toyota Motor Credit’s reputation and whether it will prompt changes in industry practices to prevent similar issues in the future. As consumers become increasingly vigilant about their financial rights, regulatory scrutiny in the auto financing sector is likely to intensify, emphasizing the need for ethical conduct and accountability among financial institutions.
(Source: Reuters | WSJ | MarketWatch)
