The Consumer Financial Protection Bureau on Monday ordered Toyota’s credit arm to pay $60 million for steering customers into unnecessary products that it then made unreasonably difficult to cancel.
The agency said thousands of borrowers complained that Toyota Motor Credit employees added extra products to their loans, racking up fees for the company at consumers’ expense. It then made it unreasonably difficult for consumers to cancel these services.
Toyota Motor Credit is based in Plano, Texas, and provides financing to people who buy cars from Toyota dealers.
The company did not admit any wrongdoing as part of the settlement.
The CFPB said the company will pay $32 million to consumers who did not receive refunds they were owed; $9.9 million to consumers who tried to cancel their policies but were unable to do so; $6 million to consumers who were harmed by false information sent to a consumer reporting agency; and $52,000 to those who received inaccurate refunds. Toyota’s finance arm will also pay a $12 million penalty to the Bureau’s Victim Assistance Fund.
In one example, the CFPB said Toyota Motor Credit told customers that if they wanted to cancel additional products bundled with their car loans, they should call a hotline set up to frustrate them. Employees who answered the phone were told to continue promoting the products until the customer asked to cancel three times. At that point, the agent was supposed to say that the only way to cancel was in writing.
More than 118,000 customers called this hotline between 2016 and 2021 alone.
In addition to paying the fines and restitution, the agency said Toyota Motor Credit will also be required to make it easy for consumers to cancel unwanted coverage, inform consumers that they can cancel the products online or in writing, and monitor dealers to make sure they don’t add products to customers’ loans without the borrower’s consent. The company will also be prohibited from tying employee compensation or performance metrics to consumer retention of bundled products like those at issue in the case.
The agency said the unnecessary products included Guaranteed Asset Protection, a type of insurance that covers the difference between the amount a consumer owes on their auto loan and what their insurance pays if the vehicle is stolen, damaged or totaled; Credit Life and Accidental Health coverage, which covers the remaining balance on the loan if the borrower dies or becomes disabled; and vehicle service agreements, which reimburse borrowers for parts and service beyond what is covered by the manufacturer’s warranty.
The CFPB said these products averaged between $700 and $2,500 per loan.
The agency also said the company knowingly provided false information to credit rating agencies, damaging its customers’ credit scores by telling the reporting companies that consumers had missed their payments when they had actually returned the vehicles they had leased.
