The U.S. Consumer Financial Protection Bureau on Monday ordered Toyota Motor Credit Corporation to pay $60 million for making it difficult to cancel unwanted services.
The CFPB says TMCC, which provides financing for vehicles sold by Toyota dealerships, delayed and withheld refunds, refunded incorrect amounts and “knowingly tarnished consumers’ credit reports with false information.” The federal watchdog says TMCC must pay $48 million to harmed consumers and a $12 million fine.
"Toyota's lending arm illegally withheld refunds, made borrowers run through obstacle courses to cancel unwanted services, and tarnished their credit reports," CFPB Director Rohit Chopra said in a statement. "Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers."
TMCC made it difficult for borrowers to cancel loan-related insurance policies, including Guaranteed Asset Protection, Credit Life and Accidental Health coverage, and vehicle service agreements, the CFPB says. If a borrower’s vehicle is stolen, damaged or totaled, TMCC’s GAP product pays the difference between the borrower's loan balance and the amount covered by their auto insurance. CLAH coverage pays the borrower’s loan balance if the borrower dies or becomes disabled.
The bundled products averaged $700 to $2,500 per loan, which could increase borrowers’ costs and boost TMCC’s profits.
“Thousands of consumers complained to Toyota Motor Credit that dealers had lied about whether these products were mandatory, included them on contracts without the borrowers’ knowledge, or rushed through paperwork to hide buried terms,” the press release says.
From 2016 to 2021, TMCC directed more than 118,000 consumers to a “dead-end cancellation hotline” whose employees were directed to prevent cancellations, the CFPB says.
“Representatives on the hotline were instructed to keep promoting the products until a consumer had verbally requested to cancel three times, at which point the representatives would tell the consumer that it was only possible to cancel by submitting a written request,” the press release says.
The CFPB says TMCC may not compensate employees or evaluate them based on “consumers’ retention of bundled products.”
“Toyota Motor Credit must also make it easy for consumers to cancel unwanted coverage, monitor auto dealers for the imposition of these products without consumer consent, and inform consumers who have these products of their ability to remove the products online or in writing,” the press release says.
In an emailed statement, the company said it admitted no wrongdoing but would follow the CFPB’s order.
“Toyota Motor Credit Corporation (TMCC) is committed to doing what’s right for our customers and strives to consistently follow all federal and state laws in our sales, customer service, and administrative practices,” the statement said. “TMCC admitted to no wrongdoing but agreed to the terms of the consent order with the Consumer Financial Protection Bureau (CFPB) to fulfill our commitment to continually provide ever-better service to our customers. In most instances, TMCC has already addressed the areas of concern cited by the Bureau. We will continue to enhance our practices to deliver the best possible customer experiences.”