Toyota Motor Credit ordered to pay $60 million for illegal lending and credit reporting misconduct

The Consumer Financial Protection Bureau has ordered Toyota Motor Credit to pay $60 million for illegal lending and credit reporting misconduct. This comes as a response to the company's actions that include directing customers to dead-end cancellation hotlines, withholding refunds, and tarnishing credit reports with false data.

Details of this issue have been outlined in an official announcement.

According to a press release by the Consumer Financial Protection Bureau (CFPB), they have ordered Toyota Motor Credit Corporation to pay $60 million in consumer redress and penalties for operating an illegal scheme to prevent borrowers from canceling product bundles that increased their monthly car loan payments. The company withheld refunds or refunded incorrect amounts on the bundled products and knowingly tarnished consumers' credit reports with false information. The CFPB is ordering Toyota to stop its unlawful practices, pay $48 million to harmed consumers, and pay a $12 million penalty into the CFPB's victims relief fund. Toyota Motor Credit provides financing for consumers buying cars through Toyota dealerships and offers optional products and services sold with the vehicles.

The list of allegations against Toyota Motor Credit continues further. According to the press release, Toyota Motor Credit has been accused of several issues, including directing consumers to a dead-end cancellation hotline, applying refunds to principal payments, withholding refunds, and furnishing false data to consumer reporting companies. The company directed over 118,000 consumer calls to a "retention hotline" to dissuade cancellations, and applied refund amounts as an additional payment toward principal, reducing the number of monthly payments. This practice was used to discourage cancellations and discourage customers from requesting direct refunds. Toyota Motor Credit also failed to refund prepaid GAP and CLAH premiums to consumers who paid off the loan or ended the lease before the contract ended. Additionally, the company failed to promptly correct negative information sent to consumer reporting companies, and failed to maintain reasonable policies and procedures to ensure accurate payment information. These issues highlight the company's failure to provide fair and accurate customer service.

In response to these allegations, the Consumer Financial Protection Bureau (CFPB) has taken decisive action. According to the press release, Toyota Motor Credit has been ordered by the Consumer Financial Protection Bureau (CFPB) to pay nearly $48 million in consumer redress, including $32 million for consumers who did not receive refunds on unearned GAP and CLAH premiums, over $9.9 million for those unable to cancel their coverage, and over $6 million for those affected by false information sent to a consumer reporting company. The company must also stop illegal practices, such as tying employee compensation or performance measurements to consumers' retention of bundled products, and make it easy for consumers to cancel unwanted coverage. Additionally, Toyota Motor Credit will pay a $12 million civil penalty to the CFPB's victims relief fund.