Toyota Motor Credit Corporation, the financing arm of Toyota Motor Corporation in the United States, has been ordered by the Consumer Financial Protection Bureau (CFPB) to pay $60 million for illegal lending and credit reporting misconduct. The order, issued on November 20, 2023, addresses practices related to add-on products and inaccurate credit reporting that unfairly harmed consumers.
The CFPB found that Toyota Motor Credit violated the Consumer Financial Protection Act by making it difficult for customers to cancel unwanted add-on products like Guaranteed Asset Protection (GAP) and Credit Life and Accidental Health (CLAH). These add-ons, often pushed by dealerships, were difficult to remove even when consumers realized they didn’t want or need them. The CFPB also determined that Toyota Motor Credit unfairly failed to automatically refund unearned premiums for GAP and CLAH when customers paid off their loans early or ended leases, meaning consumers weren’t getting back money owed to them. Further issues were found with inaccurate refunds for vehicle service agreements due to system errors.
In addition to these lending practice violations, the CFPB found that Toyota Motor Credit violated the Fair Credit Reporting Act. The company falsely reported some customer accounts as delinquent even after vehicles had been returned. Toyota Motor Credit also failed to correct these inaccuracies with consumer reporting agencies, damaging consumers’ credit scores. The CFPB order highlights a failure to maintain reasonable policies and procedures to ensure the accuracy of payment information reported to credit bureaus.
Under the terms of the order, Toyota Motor Credit is required to pay $48 million in consumer redress to compensate affected customers. They must also pay a $12 million civil money penalty. Beyond the financial penalties, the order mandates that Toyota Motor Credit cease its unlawful practices and implement measures to ensure compliance with consumer financial protection laws. Critically, the company is prohibited from using incentive-based compensation for employees that is linked to the sale of add-on products, aiming to prevent future pressure tactics on consumers at dealerships.
Consumers who believe they may be entitled to redress under this order can contact Toyota Motor Credit Corporation for more information. They can call a toll-free number at 1-833-462-3599, email [email protected], or write to Toyota CFPB Remediation, c/o Kroll Settlement Administration, PO Box 225391, New York, NY 10150-5391. In-person assistance is also available at Kroll Settlement Administration, 2000 Market Street Ste 2700, Philadelphia, PA 19103.
This CFPB order serves as a reminder of the importance of fair lending practices and accurate credit reporting within the auto finance industry. For consumers dealing with auto loans and related products from Toyota Motor Credit, it is crucial to understand their rights and the remedies available to them under this settlement.
