CFPB ordered Toyota Motor Credit to pay a hefty fine after customers complained of deceptive tactics and difficulties in canceling unnecessary products.
The Consumer Financial Protection Bureau (CFPB) announced today that it has ordered Toyota Motor Credit, the credit arm of Toyota, to pay a $60 million penalty for engaging in deceptive practices that impacted thousands of consumers. The CFPB found that Toyota Motor Credit tricked customers into purchasing unnecessary products, subsequently making it excessively difficult for them to cancel these services.
Numerous borrowers lodged complaints, alleging that employees of Toyota Motor Credit added extra products to their loans, resulting in fees for the company at the expense of consumers. Moreover, the CFPB asserted that the company created obstacles for consumers seeking to cancel these services.
Under the terms of the settlement, Toyota Motor Credit admitted no wrongdoing but agreed to pay $32 million to consumers who did not receive owed refunds, $9.9 million to consumers unable to cancel their policies, $6 million to those harmed by false information sent to consumer reporting companies, and $52,000 for individuals who received inaccurate refunds. Additionally, the company will pay a $12 million penalty to the CFPB’s victim relief fund.
The CFPB today ordered Toyota Motor Credit Corporation to pay $60 million in consumer redress and penalties for operating an illegal scheme to prevent borrowers from cancelling product bundles that increased their monthly car loan payments. https://t.co/aHdekhqeoK
— consumerfinance.gov (@CFPB) November 20, 2023
In one highlighted example, the CFPB revealed that Toyota Motor Credit established a hotline for customers wishing to cancel extra products. However, the process was intentionally frustrating, requiring customers to request cancellation three times via phone before being informed that the only way to cancel was through a written request. Over 118,000 customers called this hotline from 2016 to 2021.
In addition to the financial penalties and restitution, Toyota Motor Credit is mandated to streamline the cancellation process for unwanted coverage, inform consumers of online or written cancellation options, and monitor dealers to prevent unauthorized additions of products to customer loans. The company is also prohibited from linking employee compensation or performance metrics to consumer retention of bundled products.
The unnecessary products in question included Guaranteed Asset Protection, Credit Life and Accidental Health coverage, and vehicle service agreements, with average costs ranging from $700 to $2,500 per loan.
The CFPB further noted that Toyota Motor Credit knowingly provided false information to rating agencies, negatively impacting customers’ credit scores by inaccurately reporting missed payments for leased vehicles that had actually been returned.