The Consumer Financial Protection Bureau has ordered Toyota Motor Credit Corp. to pay $60 million in consumer redress and penalties for running an illegal scheme that prevented borrowers from canceling product bundles.
Toyota Motor Credit, the U.S.-based financing arm of Toyota Motor Corp., withheld refunds or refunded incorrect amounts on bundled products and knowingly damaged consumers' credit reports with false information, the federal agency said.
It directed Toyota Motor Credit to stop the practice, pay $48 million to affected consumers, and assessed a $12 million penalty to be paid to the bureau's victims relief fund.
"Toyota's lending arm illegally withheld refunds, made borrowers run through obstacle courses to cancel unwanted services, and tarnished their credit reports," said agency Director Rohit Chopra in a press release. "Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers."
The company provides financing for consumers buying cars through Toyota dealerships and offers optional F&I products and services. Products offered by Toyota Motor Credit include:
- Guaranteed Asset Protection
- Credit Life and Accidental Health coverage
- Vehicle service contracts
The cost of the bundled products, financed by Toyota Motor Credit, average between $700 and $2,500 per loan, the agency said.
Dealers for Toyota Motor Credit faced complaints from thousands of consumers for lies about product mandates, hiding buried terms, and including them on contracts without their knowledge, the bureau said.
The consumers reported the company made it cumbersome to cancel and failed to provide proper refunds once they did cancel, according to the agency, which said the company also falsely informed consumer reporting agencies about missed payments and neglected to fix known reporting errors.
It said the actions violated the Consumer Financial Protection Act’s prohibition against unfair and abusive acts and practices, as well as the Fair Credit Reporting Act and its implementing regulation.
Originally posted on Auto Dealer Today