Toyota to pay $60 million for lending abuses, tarnishing credit reports, US regulator says By Reuters

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Toyota to pay $60 million for lending abuses, tarnishing credit reports, US regulator says

Published Nov 20, 2023 09:43AM ET Updated Nov 20, 2023 03:59PM ET

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Toyota to pay $60 million for lending abuses, tarnishing credit reports, US regulator says

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By Jonathan Stempel

(Reuters) -Toyota will pay $60 million to settle a U.S. regulator's charges it illegally prevented car buyers from canceling unwanted product bundles that increased their monthly loan payments, and tarnished buyers' credit reports.

The Consumer Financial Protection Bureau (CFPB) on Monday said Toyota Motor (NYSE:TM) Credit, the automaker's U.S.-based lending arm, will pay a $12 million civil fine and $48 million to car buyers harmed since 2016.

Toyota Motor Credit, based in Plano, Texas, provides financing for people who buy vehicles at Toyota dealerships, with nearly 5 million customer accounts as of Oct. 2022.

Monday's settlement concerned "add-on" products, typically costing $700 to $2,500 per loan, that provide protection when vehicles are damaged, stolen or out of warranty, and when car buyers die or become disabled.

According to the CFPB, thousands of borrowers complained to Toyota Motor Credit that dealers lied about whether these products were mandatory, or rushed the paperwork so they would not realize how much they were paying.

The regulator said Toyota Motor Credit made it "extremely cumbersome" to cancel the bundles, including by routing more than 118,000 borrowers to a hotline where agents were instructed to dissuade cancellations, and often failed to provide refunds.

Toyota Motor Credit was also accused of falsely telling credit reporting agencies that borrowers had missed payments, and failing to promptly correct negative information for more than 27,500 borrowers.

Under a consent order, and without admitting or denying liability, Toyota Motor Credit agreed to make it easy to cancel unwanted product bundles.

It also agreed to more closely monitor dealers' conduct, and ensure that employee pay and performance metrics are not tied to sales of the bundles.

Toyota did not immediately respond to requests for comment.

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