Toyota Punished: $60M Fine for Overloading Customers with Loans

Toyota Credit Corp, a business that provides credit to customers from Toyota, has been fined $60 million in civil penalties by the Consumer Financial Protection Bureau. The company was found to have exposed their customers to unauthorized risk, not accurately disclosing important information, and saddling customers with over loaded loans. According to the CFPB, Toyota Credit “had a history of risky practices for a number of years,” starting as far back as 2006. These practices included engaging in sales incentives that were “unfairly and unlawfully tying consumers’ credit terms to the sale of other products or services.” While it is certainly within a company’s prerogative to aggressively pursue sales, involving consumers in potentially risky credit arrangements in order to incentivize sales is not acceptable. Beyond incentivizing sales, the CFPB found that Toyota Credit underreported loan security information, which prevented consumers from obtaining important consumer protections. Similarly, when customers chose to pay off their loans, the company did not always accurately or expediently report this information to the credit bureaus. This caused customers to be stuck with inaccurate credit ratings. The CFPB also found that Toyota Credit was selling unnecessary insurance to consumers when they inserted auto debt protection and credit disability insurance in loan contracts without the consumers’ knowledge or consent. This was done in an effort to offer lower loan rates. In addition to the $60 million civil penalty, Toyota Credit must also “treat customers fairly in accordance with the law,” a requirement of the CFPB. This means that they must stop re-selling auto debt protection and credit insurance without first getting the consumer’s consent, clearly explaining the terms of the loan, and accurately reporting any changes in the loan to the credit bureaus. Toyota Credit has already begun the process of reforming their business practices, but customers should also remain wary. Consumers are urged to review any contract they sign with Toyota Credit or any other company in order to protect themselves from potentially more risky credit arrangements. As the CFPB pointed out, “consumers are entitled to contracts that accurately reflect the terms of their agreements and to credit ratings that accurately reflect their creditworthiness.”