Toyota pays $60M to settle U.S. complaint

The lending arm of Toyota Motor Corp. will pay $60 million to settle allegations by a U.S. regulator that it misled customers into buying extra products that increased their payments and then gave them a runaround when they tried to cancel.

Toyota Motor Credit Corp. is alleged to have lied about whether the extras were mandatory or rushed through paperwork to hide them, according to a Monday statement by the Consumer Financial Protection Bureau. Toyota unreasonably hindered customers who tried to cancel, and if they succeeded, it withheld refunds by applying the sum to the loan’s principal, the protection bureau said. The lender sometimes also falsely reported payment information to credit agencies, the agency said.

The unit will pay $48 million to consumers and $12 million to a 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,” Consumer Financial Protection Bureau Director Rohit Chopra said in the statement. “Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers.”

In a separate statement, Toyota Motor Credit said it didn’t admit any wrongdoing but agreed to the Consumer Financial Protection Bureau consent order “to fulfill our commitment to continually provide ever-better service to our customers. In most instances, TMCC has already addressed the areas of concern cited by the Bureau.”

The protection bureau claimed the lender directed consumers seeking to cancel add-on products, such as Guaranteed Asset Protection insurance, to a “dead-end” hotline. Representatives “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,” according to the protection bureau.

Similar to the finance arms of other large automakers, Toyota regularly packages some of its auto loans and leases into bonds known as asset-backed securities. Ear- lier this month it issued a $1.6 billion asset-backed se- curity, its fourth so far this year backed by auto loans, according to data compiled by Bloomberg.