The lender also reportedly failed to provide refunds for “product bundles” and furnished incorrect information to the credit reporting agencies—a good reminder to review your compliance policies.
11/20/2023 3:40 P.M.
3 minute read
The Consumer Financial Protection Bureau’s second consent order within a week focuses on actions in violation of the bureau’s prohibition against unfair and abusive acts and practices, as well as the Fair Credit Reporting Act and its implementing regulation.
Toyota Motor Credit Corporation is ordered to pay $60 million in consumer redress and penalties for the reported “illegal scheme to prevent borrowers from cancelling product bundles that increased their monthly car loan payments,” according to a news release from the CFPB. In addition to an order to stop the practices, the company will pay a $12 million penalty into the CFPB’s victims relief fund.
Toyota Motor Credit qualifies as a data furnisher under Regulation V of the FCRA because it provides updates on consumer payments to the credit reporting agencies (CRAs), according to the consent order (PDF).
While not directly related to debt collection, the CFPB’s consent order is a good reminder of its focus on credit reporting and unfair, deceptive or abusive acts or practices (UDAAP) in its supervisory examinations or responses to consumer complaints.
To help ACA International members understand implications from another recent CFPB order against a lender that apply to compliance management systems and UDAAP examination procedures, Leslie Bender, senior attorney at Eversheds Sutherland (US) LLP, provided an overview on the Nov. 15 ACA Huddle, ACA previously reported.
The CFPB reports that thousands of consumers complained to Toyota Motor Credit about its product offerings and whether they were mandatory and included the products in their contracts without their knowledge.
Specifically, the company, according to the CFPB:
- Prevented many consumers from cancelling product bundles by making the process unreasonably difficult. Consumers who wanted to cancel over the phone were directed to a “retention hotline” operated by employees whose primary objective was to dissuade such cancellations.
- Instead of issuing a refund check or lowering the monthly payment amount upon a consumer’s cancellation of bundled products, Toyota Motor Credit applied the refund amount as an additional payment toward principal, reducing the number of monthly payments. Applying the refund in this way effectively delayed the return of the consumer’s money until the end of the sale or lease agreement term.
- Failed to refund prepaid GAP and CLAH premiums to consumers who paid off the loan or ended the lease before the end of the contract. Toyota Motor Credit also relied on faulty calculations which resulted in incorrect refunds for consumers who canceled their vehicle service agreements.
- Falsely reported customer accounts as delinquent for failure to make monthly account payments even though customers had already returned leased vehicles, and the company did not promptly correct the negative information it had sent to consumer reporting companies even though it knew it was wrong.
In addition to the redress to consumers, Toyota Motor Credit is prohibited from tying employee compensation or performance measurements to consumers’ retention of bundled products, such as GAP coverage or extended warranties, according to the CFPB.
It must also make it easy for consumers to cancel unwanted coverage, monitor auto dealers for the imposition of these products without consumer consent, and inform consumers who have these products of their ability to remove the products online or in writing.