Bloomberg — Toyota Motor Corp.’s (TM) lending division will pay $60 million to settle a U.S. regulator’s allegations that it tricked customers into buying additional products that increased their payments and then dragged them off when they tried to cancel them. .
Toyota Motor Credit Corp. allegedly lied about whether the extras were required or rushed through paperwork to hide them, according to a Monday statement from the Consumer Financial Protection Bureau. Toyota placed unjustified obstacles on customers who tried to pay it off and, if they were successful, withheld refunds by applying the amount to the principal of the loan, according to the CFPB. At times, the lender also falsely reported payment information to the credit bureaus, according to the agency.
The unit will pay $48 million to consumers and $12 million to a victim aid fund.
“Toyota’s lending arm illegally withheld repayments, ran borrowers through obstacle courses to cancel unwanted services and tarnished their credit reports,” CFPB Director Rohit Chopra said in the statement. “Given the increasing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that deceive their customers.”
In a separate statement, Toyota Motor Credit said it did not admit any wrongdoing but agreed to the CFPB consent order “to fulfill our commitment to continually provide better service to our customers. In most cases, TMCC has already addressed the areas of concern cited by the Bureau.”
The CFPB alleged that the lender directed consumers who wanted to cancel additional products, such as Guaranteed Asset Protection insurance, to a “dead-end” hotline. According to the CFPB, representatives “they were instructed to continue promoting the products until the consumer had verbally requested cancellation three times.”at which point they told him that it was only possible to cancel them by submitting a written request.”
Like the financial arms of other big automakers, Toyota regularly packages some of its auto loans and leases into bonds known as asset-backed securities. Earlier this month it issued a $1.6 billion asset-backed bond, the fourth so far this year backed by auto loans, according to data compiled by Bloomberg.
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