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Toyota Motor’s financial service subsidiary has been slapped with a $60 million fine for alleged illegal lending and credit reporting misconduct. The Consumer Financial Protection Bureau (CFPB) said on Monday, Nov. 20, that Toyota Motor Credit Corporation (TMCC) will have to pay $48 million to consumers who were harmed by the misdeed and a $12 million civil fine.
Reuters explained that Toyota Motor Credit offers financing services to people who purchase vehicles from Toyota dealers. The company also provides other products for protection when vehicles are stolen, damaged, or require parts replacement after the warranty has expired and this costs $700 to $2,500 per loan. This offer can also be useful when borrowers die or become disabled.
Reason for the Penalty
It was reported that the U.S. regulator found that the company prevented borrowers from canceling product bundle offerings. Many tried to cancel the additional products because these raised their monthly car loan payments but it was a difficult process.
The CFPB said the company committed an unlawful act when it prevented the borrowers from dropping the bundled products which led to higher fees. The agency said thousands of people have already brought up their complaints to TMCC, explaining that dealers lied to them about the bundle being mandatory.
Issue with Cancellation of Added Product Bundles
In other instances, some individuals said the dealers rushed the paperwork so they failed to notice how much they were paying. The CFPB said TMCC made it very inconvenient to cancel the bundle and while some were able to do so, the company failed to refund their money. And this is not all, the regulator added that Toyota’s financial service arm also damaged credit reports by claiming borrowers missed payments which turned out to be not true.
"Toyota's lending arm illegally withheld refunds, made borrowers run through obstacle courses to cancel unwanted services, and tarnished their credit reports," Rohit Chopra, director of CFPB said 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."
Meanwhile, Toyota Motor Credit was said to have agreed to settle but did not admit nor deny liability.
Photo by: Sadman Nafis/Unsplash
