The auto finance division of Toyota Motor Co. must pay $60 million after the Consumer Financial Protection Bureau found that it engaged in various practices that violated federal law.
Toyota Motor Credit Co. delayed and withheld customer refunds, made it difficult to cancel unwanted add-on products and reported false information about consumers to credit bureaus, according to a CFPB consent order. The auto lender's practices violated the Consumer Financial Protection Act of 2010,
"Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers," CFPB Director Rohit Chopra said in a statement Monday.
A spokesperson for Toyota Motor Credit did not respond to a request for comment. The company agreed that the facts presented in the consent order "will be taken as true … in any subsequent civil litigation by the bureau to enforce the consent order," according to an agreement signed last week by Toyota Motor Credit CEO Mark Templin.
Under the agreement, Toyota Motor Credit agreed to pay a $12 million fine and to provide $48 million in redress to affected customers.
The Toyota enforcement action is the CFPB's first settlement with an auto finance company since its July 2022 consent order with Hyundai's U.S. financing arm.
In that case, the CFPB
In the Toyota case, the auto finance company allegedly reported negative information to the credit-reporting agencies in cases where customers were in good standing and had already returned their leased vehicles.
Toyota's lending arm "knowingly tarnished consumers' credit reports with false information," Chopra said in a statement.
Other alleged misconduct related to add-on products, including extended warranties. Customers who attempted to cancel recurring charges for optional Toyota products were directed to a hotline staffed with representatives who had been instructed to convince them not to cancel, according to the CFPB.
To successfully cancel, customers needed to request the cancellation three times before Toyota representatives directed them to the next step: a written request for cancellation.
Under the consent order, the CFPB ordered Toyota to stop tying employee compensation to whether or not customers hold on to add-on products. The host of add-on products offered by Toyota retail for an average of between $700 and $2,500, according to the CFPB.
"The inclusion of these products … can significantly increase the amount financed, the monthly payment, and the amount of the finance charge collected by Toyota Motor Credit," the CFPB wrote in its consent order.
Since 2022, rising interest rates have boosted the cost of financing new and used car purchases, making payments less affordable for American consumers who are also dealing with
The penalty against Toyota's financing arm is the latest in a flurry of large fines levied recently by the CFPB. Last week, the agency hit the high-cost consumer lender Enova International with
