$60 million in redress, fine ordered for automaker credit arm in alleged efforts to withhold refunds, provide false data

A $60 million payment for fines and consumer redress was ordered against a carmaker’s lending arm for allegedly directing customers to a dead-end cancellation hotline, withholding refunds, and “knowingly” tarnishing credit reports with false data, the federal consumer financial protection agency said Monday.

The Consumer Financial Protection Bureau (CFPB) said its order against Toyota Motor Credit Corp. was over an illegal scheme to prevent borrowers from cancelling products bundles that increased their monthly car loan payments.

CFPB said it was ordering the company, the U.S.-based auto-financing arm of the Toyota Motor Corp. headquartered in Plano, Texas, to stop its allegedly unlawful practices, pay nearly $48 million to harmed consumers, and pay an additional $12 million fine into the CFPB’s victims relief fund.

The bureau said the firm’s actions violated the Consumer Financial Protection Act’s (CFPA) prohibition against unfair and abusive acts and practices, as well as the Fair Credit Reporting Act (FCRA) and its implementing regulation.

Among other things, the bureau alleged that Toyota Credit:

  • Prevented many consumers from cancelling product bundles by making the process unreasonably difficult by directing them to a “dead-end” debt cancellation hotline.
  • Delayed refunds by applying them to principal payments instead of issuing a refund check or lowering the monthly payment amount upon a consumer’s cancellation of bundled products.
  • Withheld refunds or provided inaccurate refund amounts by failing to return prepaid Guaranteed Asset Protection (GAP) and Credit Life and Accidental Health (CLAH) premiums to consumers who paid off the loan or ended the lease before the end of the contract.
  • Furnished false data to consumer reporting companies by falsely reporting customer accounts as delinquent for failure to make monthly account payments even though customers had already returned leased vehicles; and did not promptly correct the negative information it had sent to consumer reporting companies even though it knew it was wrong.

CFPB Orders Toyota Motor Credit to Pay $60 Million for Illegal Lending and Credit Reporting Misconduct