Toyota financial unit to pay $60 million for illegal lending, credit reporting misconduct

Toyota Motor Corp.'s U.S.-based auto financing unit will pay $60 million in fines and restitution to settle a U.S. regulator's charges it illegally prevented borrowers from canceling product bundles that increased their monthly car loan payments.

The Consumer Financial Protection Bureau on Monday said Toyota Motor Credit will pay a $12 million civil fine, and $48 million to harmed consumers.

The company did not admit or deny liability in agreeing to settle.

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.

The company also offers products, typically at a cost of $700 to $2,500 per loan, that offer protection when vehicles are stolen, damaged, or require parts and service after warranties expire, and when borrowers die or become disabled.

According to the CFPB, thousands of consumers complained to Toyota Motor Credit that dealers lied about whether these products were mandatory, or rushed the paperwork so they wouldn't 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 the consent order, 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.

In a statement, Toyota Motor Credit said it "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 company said it "admitted to no wrongdoing but agreed to the terms of the consent order with the Consumer Financial Protection Bureau 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."