Toyota's Financing Arm Hit With $60M Penalty: CFPB Cracks Down On Unlawful Loan Practices

The Consumer Financial Protection Bureau (CFPB) has asked Toyota Motor Corp's TM Toyota Motor Credit Corporation to pay $60 million in consumer redress and penalties.

The penalty is for operating an illegal scheme to prevent borrowers from canceling product bundles that increased their monthly car loan payments. 

Toyota Motor Credit Corporation is the United States-based auto-financing arm of the automobile giant, with nearly five million customer accounts and more than $135 billion in assets as of October 2022.

The cost of the bundled products, financed by Toyota Motor Credit, averaged between $700 and $2,500 per loan.

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As per the regulatory, Toyota Motor Credit harmed consumers by directing them to a dead-end cancellation hotline, delaying refunds by applying them to principal payments, withholding refunds or providing inaccurate refund amounts as well as furnishing false data to consumer reporting companies.

CFPB has ordered Toyota Motor Credit to stop its unlawful practices, pay $48 million to the affected consumers, and a $12 million penalty should be deposited into the CFPB's victims relief fund.

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Price Action: TM shares are trading lower by 2.78% at $187.98 on the last check Monday.