RSSThe Consumer Financial Protection Bureau fined Plano, Texas-based Toyota Motor Credit Corp., $60 million for preventing borrowers from canceling product bundles which increased their monthly car loan payments.
From 2016-21, the auto-financing arm of Toyota Motor Corp. allegedly funneled more than 118,000 consumer calls to a dead-end cancelation hotline where employees sought to persuade them not to cancel product bundles. Representatives were reportedly instructed to keep promoting the products until the consumer asked to cancel three times, at which point the representative said it was only possible to cancel by submitting a written request.
The product bundles included services such as Guarantee Asset Protection, which covered the difference between what a customer owes and what insurance pays if a vehicle is totaled, damaged or stolen; and Credit Life and Accidental Health, which covers the remaining loan balance if an owner becomes disabled or dies. Toyota Motor Credit also offered vehicle service agreements to reimburse for non-warrantied services and parts. Dealerships frequently sell the products and services as part of a bundled package between $700 and $2,500 per loan to consumers before adding them onto car loan contracts.
According to the CFPB, thousands of consumers reported that Toyota Motor Credit lied about whether the products were mandatory, included the products on contracts without the knowledge of consumers and rushed through paperwork to conceal buried terms. The auto financier allegedly reported customer accounts as delinquent for failure to make monthly account payments even if they had already returned leased vehicles, then failed to promptly correct the erroneous reports despite knowing they were wrong.
Toyota Motor Credit allegedly harmed consumers’ credit reports by withholding refunds or refunding incorrect amounts on bundled products. Toyota Motor Credit didn’t refund prepaid GAP and CLAH premiums to consumers who paid off the loan or ended the lease before the contract ended.
The auto financier was ordered to pay $48 million to harmed consumers and $12 million into the CFPB’s victims relief fund. The CFPB banned Toyota Motor Credit from tying employee compensation or performance measurements to consumers’ retention of bundled products such as extended warranties or GAP coverage.
“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. “Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers.”
According to CNBC, Toyota Motor Credit didn’t admit to wrongdoing “but agreed to the terms of the consent order with the Consumer Financial Protection Bureau to fulfill our commitment to continually provide ever-better service to our customers,” said Toyota Financial Services Senior Manager of Corporate Communications Vincent Bray. He added that the company has already addressed the areas of concern cited by the CFPB, and will continue to improve its practices.
Considered one of the largest indirect auto lenders in the United States, Toyota Motor Credit had nearly 5 million consumer accounts and more than $135 billion in assets as of October 2022.
