Toyota’s financing branch was fined $60 million by a federal consumer regulator for infringing on car buyers’ rights to cancel add-ons to their loans. The Consumer Financial Protection Bureau accused Toyota’s lending arm of illegally withholding refunds and making it difficult for borrowers to cancel unwanted services, ultimately tarnishing their credit reports. The average cost of these add-ons ranged from $700 to $2,500 per loan. The company has admitted no wrongdoing but agreed to comply with the order in an effort to provide better service.
In addition to the $60 million fine, Toyota Motor Credit Corp. (TMCC) must pay $48 million in consumer redress and a $12 million civil money penalty to the CFPB’s victims relief fund. The order also puts a stop to incentives for employees to sell add-on products.
Between the years 2016 and 2021, the CFPB found that more than 118,000 consumers called to cancel add-on services were directed to a “retention hotline,” where they were told that only written requests would be honored. Examples of these add-ons include Guarantee Asset Protection (GAP), Credit Life and Accidental Health (CLAH), and vehicle service agreements.
TMCC was also found to have violated the Fair Credit Reporting Act and failed to promptly correct inaccurate information provided to credit reporting agencies about delinquent returns of leased vehicles.
The company has reassured that they have addressed the concerns cited by the Bureau and will work to enhance their practices to deliver the best possible customer experiences. This news comes as the CFPB continues to take action against auto lenders who mistreat their customers.
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