Toyota Fined $60 Million by Consumer Watchdog for Car Loan Scam

The financing arm of Toyota was fined $60 million in the U.S. by a federal consumer regulator for preventing car buyers from canceling add-ons to their loans which increased their monthly loan payments and tarnished their credit reports.

The Consumer Financial Protection Bureau (CFPB) said Toyota Motor Credit Corporation (TMCC), the Japanese automaker’s U.S.-based lending arm, will pay a $12 million civil fine and $48 million to car buyers harmed since 2016. TMCC violated the Consumer Financial Protection Act by preventing customers from canceling loan add-ons that cost on average between $700 and $2,500 per loan, according to a consent order. It also failed to ensure refunds for voided services.

TMCC is one of the largest indirect auto lenders in the country and provides financing for people who buy vehicles at Toyota dealerships, with nearly 5 million customer accounts as of Oct. 2022. According to the CFPB, thousands of borrowers complained to Toyota Motor Credit that dealers lied about whether these products were mandatory, or rushed the paperwork so they would not realize how much they were paying.

However, the regulator said TMCC made it “extremely cumbersome” to cancel the bundles, including by routing more than 118,000 borrowers to a hotline where agents were instructed to dissuade cancellations and often failed to provide refunds. Toyota Motor Credit was also accused of falsely telling credit reporting agencies that borrowers had missed payments and failing to promptly correct negative information for more than 27,500 borrowers.

Under a consent order, and without admitting or denying liability, Toyota Motor Credit agreed to make it easy to cancel unwanted product bundles. It also agreed to more closely monitor dealers’ conduct, and ensure that employee pay and performance metrics are not tied to sales of the bundles.

Source: Reuters