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A U.S. government agency fined Toyota Motor Credit Corporation $60 million on Monday for what it described as running an "illegal scheme" to prevent customers from ceasing services from the company, a process that added to their monthly payments on their car loans.

The Consumer Financial Protection Bureau (CFPB), a federal agency that advocates on behalf of consumers, said that Toyota's U.S.-based financing arm kept back refunds or returned to customers wrong amounts repayments or "knowingly tarnished consumers' credit reports with false information."

As a result, the agency ordered the company to pay $48 million to affected customers and give an additional $12 million penalty to CFPB's victims relief fund.

"Toyota's lending arm illegally withheld refunds, made borrowers run through obstacle courses to cancel unwanted services, and tarnished their credit reports," Rohit Chopra, CFPB Director, said in a statement. "Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers."

A CFPB spokesperson told Newsweek that the agency identified "unlawful contact" dating to 2016, and that Toyota Motor Credit will send payments to the affected consumers by paper check.

"Most consumers who are eligible for redress do not have to do anything. Toyota Motor Credit will be contacting affected consumers about relief," CFPB told Newsweek.

Toyota denied wrongdoing on Monday.

"Toyota Motor Credit Corporation (TMCC) 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 told Newsweek in a statement. "TMCC admitted to no wrongdoing but agreed to the terms of the consent order with the Consumer Financial Protection Bureau (CFPB) to fulfill our commitment to continually provide ever-better service to our customers."

TMCC added that it had begun to address the issue raised by the CFPB.

"We will continue to enhance our practices to deliver the best possible customer experiences," the company said.

TMCC is one of America's largest financier of car loans with 5 million customers and boasts $135 billions in assets as of October 2022, according to the CFPB. The company offers financing for borrowers through Toyota dealerships across the country.

CFPB alleged that TMCC added products as part of their financing offerings that they claimed were mandatory or without a customer's awareness or expedited agreements in a way that obscured their terms to consumers.

In addition, CFPB said on Monday that when customers contacted TMCC to try and correct the issues, were given a runaround.

"Between 2016 and 2021 alone, Toyota Motor Credit funneled more than 118,000 consumer calls through [a] hotline," the agency said in a statement. "Representatives on the hotline were instructed to keep promoting the products until a consumer had verbally requested to cancel three times, at which point the representatives would tell the consumer that it was only possible to cancel by submitting a written request."

CFPB also said that TMCC had incorrectly, sometimes knowingly, reported to credit agencies missing payments from customers who had ended an agreement with the company.

"Toyota Motor Credit falsely reported customer accounts as delinquent for failure to make monthly account payments even though customers had already returned leased vehicles," CFPB said. "The company did not promptly correct the negative information it had sent to consumer reporting companies even though it knew it was wrong."

Who qualifies for refunds?

CFPB ordered Toyota's lending arm to pay back $48 million to customers harmed by the policies.

TMCC will pay about $32 million for borrowers who did not receive refunds on bundled products that were included in their agreements without them knowing, such as guaranteed asset protection, or GAP, and credit life and accidental health, or CLAH.

An additional $9.9 million will go to customers who tried to cancel these products but had been prevented from doing so. More than $6 million will go to consumers who suffered from incorrect information being shared with consumer reports firms and a minimum of $52,000 to customers who did not receive the refunds they were entitled to after ending their car service agreements.

TMCC will pay a $12 million penalty to the CFPB's victims relief fund, totaling $60 million in fines the company will have to fork over due to the alleged illegal practice.

Going forward, CFPB ordered TMCC to "stop its illegal practices," the agency said in a statement.

Update 11/20/23, 6:07 p.m. ET: This article was updated to add comment from the Consumer Financial Protection Bureau.

Uncommon Knowledge

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Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

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