Toyota fined $60 million for illegally bundling high-cost protection products

Complaints by thousands of Toyota customers, that they were scammed by the automaker’s in-house financing services unit by buying products they couldn’t cancel, have resulted in $60 million in fines to settle charges from the Consumer Financial Protection Bureau.

According to the charge, Toyota Motor Credit sells products, typically at a cost of $700 to $2,500 per loan, that offer protection when vehicles are stolen, damaged or require parts and service after warranties expire.

The agency said that thousands of consumers subsequently complained that dealers lied about whether these products were mandatory, or rushed the paperwork so they wouldn't realize how much they were paying.

The regulators said that Toyota Motor Credit then “devised a scheme to retain the revenue from these products” and made it "extremely cumbersome" to cancel the added-on bundles, and failed to provide refunds to consumers who did cancel. The company, the CFPB charged, also “falsely told consumer reporting companies that borrowers had missed payments, and it failed to correct consumer reporting errors it knew were wrong.”

Toyota has not yet responded publicly to the settlement. It is among the largest indirect auto lenders in the United States, with nearly five million customer accounts and more than $135 billion in assets.

The CFPB is ordering Toyota Motor Credit to pay $48 million to harmed consumers, and pay a $12 million penalty into the 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," said CFPB Director Rohit Chopra. "Given the growing burdens of auto loan payments on Americans, we will continue to pursue large auto lenders that cheat their customers.”

 

People hate on the CFPB as being a useless government bureaucracy, but clearly they're not. I love when they hand down these fines to companies for fleecing customers.

Sad thing though, this will just go under "cost of doing business" for Toyota, I'm sure they made much more than 60 million. It's like when banks fleece people for billions, and get slapped with a 100 million fine.

 

It is about time this happened. That is the only reason I bought a lightly used '22 instead of the new '23 I was nearly forced to sign on.

 

Which is exactly why CFPB is thought to be useless.

 

It’s not useless - but what we need to do as consumers is follow their lead.

Punish Toyota by not using their financing. Heck, my credit union was a far better choice for my last few purchases.

 

60 million equates to 1.2 million 4runners @50k

 

Good! Although, it would suck if there isn’t some other way of that consumers can seek enforcement against “mistakes” like screwing up your credit with false (or “incorrect” if you want to be generous), or going back on their agreements to issue refunds. Does the FTC actually handle direct consumer complaints like this?

 

If the $60m were divided across all five million borrowers, the fine would amount to about $12 per borrower.

Whatever they did, at least part of this falls under ‘read what you’re signing’.

 

CFPB is where you want to go for finance related issues. Otherwise doesn’t hurt to reach out to FTC if it involves interstate commerce.

 

Toyota themselves were engaging in the actions.

The scummy F&I managers weren’t even part of the complaint.

 

“Education is what you get from reading the small print in contracts. Experience is what you get from not reading it.”
Reminds me of the meme about the high school kid asking the school something about teaching her to do taxes and the school’s reply, “Shut up and square dance.” This is not just an individual failure, but an education curriculum failure as well.

 

Whether it's simple or not is probably dependent on the dealership. I suppose they can try to make it complex, especially if someone is shopping payment instead of price. But if I research everything ahead of time, and discuss only OTD pricing (as with my current 4R), it's pretty much impossible for them to wiggle stuff in without my noticing. Hasn't happened yet.

 

Yes, but Toyota doubled down by making it unreasonably hard to cancel.

Also, the dealers are acting as agents of Toyota Financial when selling the products.

Best ever experience with extended warranties was through the dealer we used to buy our Volvo warranties from - not the dealer we bought the cars from either. You can now get price quotes online and also even fill out cancellation paperwork online as well.

 

I assign blame 50% Toyota, 500000000000% scum sucking dealers.

But it’s hard to go after dealers. Easy to go after Toyota and make them regulate their dealers better.

 

I still don't understand why people just don't sign and walk out. It's not like they're holding your firstborn hostage until you sign the papers. Paying over MSRP, buying junk add-ons, and all of the junk F&I products. Emotionally compromised consumers allow themselves to fall into these traps over and over again, then cry when the bill shows up. Then, a bunch of greedy lawyers make a ton of money in a class action lawsuit, all while the rest of us suffer with increased prices. Someone will pay for this down the line and I can promise you it won't be Toyota.

 

Well, they apparently are very good at making people feel like they can’t walk out or say no. That’s the problem. Not everyone has the same fortitude in high stress situations…they can smell the people that are more vulnerable in those situations and are ruthless. They know how to threaten without saying it in as many words…just like mafia. The weaker these clowns see a customer, the more brash and brazen they are with threats.

I’ve known good people that have been really screwed over really bad in this type of situation (not necessarily toyota). If people keep thinking we shouldn’t use lawyers against their lawyers just because it makes consumer costs higher, then it’s also accepting and excusing predatory business practices.

Also, what makes you think that predatory business practices don’t result in additional costs will have to be payed by others? Bankruptcy is the most direct example of how everyone pays the price of predatory practices (not just the customer of a specific product). Because less educated, less apt, or more vulnerable customers get preyed upon frequently.

It seems more and more that folks in any type of business view that “cheating is ok as long as you get away with it.” Before, businesses knew cheating was cheating, but did it anyway. Now there is a sense of entitlement that it isn’t cheating at all if you get away with it.

This is why it’s so important to bring complaints regarding these practices, so businesses understand that deception and fraud are “not good”. To remind them of kindergarten lessons on why lying and stealing isn’t good for others or themselves. Sure it costs money to sue someone, but why blame the one that was deceived or defrauded?

It doesn’t do us any good to align ourselves with the financial interests of the ones doing the scamming. In fact, that’s one of first tricks of scammers try in the when closing deals…like the familiar ”we got to make a dollar on this deal too…that’s why we added X charge on the contract”.

 

Why do innocent people confess to crimes they didn’t commit?

It actually happens. Put someone under enough emotional duress and manipulate them just right, and you can get people to do what you want.

People who have been trained to resist can. For a while.

Look up William Buckley (not the commentator) who was CIA station chief in Beirut. They broke him through torture that is not fit to post here - and we know this because they sent video of it to the CIA.

 

Very detailed and amazing post! I 100% agree with everything that you said.

When these snakes get away with their strong-arm tactics, they should be held to the highest accountability.

I just wish that the consumers would wake up and start using the information available to them and get out of the "Victim" mentality. Accountability starts with the consumer.

 

Another insightful post! I also 100% agree with this.

 

Back in my dealership days the F&I guys would always make rounds in the shop bragging about the packages they pushed, all the while chain smoking in your bay.

These cats are different and they appeared to enjoy it. Showed me a an early time to not always trust guys that made victory laps like sexual conquests over finance packages.

Just another day in the life working at a dealership, Never know what you will see or hear.

 

What is hilarious is when you see the local commercials where the push the " We treat you like family".

Time permitting I look on YouTube for undercover camera videos just to keep up on what the new "Opportunities" are being used.

 

Toyota dealerships are like time share salesmen. "Look under your notepad! Oh cool, you have the super secret VIP discount, so we'll take half off the undercoating treatment!"

 

The whole situation is not too surprising. You will notice that after agreeing with the Sales Dept./Rep on the price of the vehicle, they lead you to the F&I office (always a separate office, not in the open like the sales people's desk.) That's what's called the "closing" room, where the real final sale actually happens. Even if you intend to pay cash for the vehicle, you will always end up in that office. Of course, as mentioned, that's where they will try to sell you extended warranties and a host of other service related items. Those items are a very profitable part of the dealership income. And, they are commissionable for the F&I Manager. Those "managers" are actually more like professional closers (there is a difference). It's similar to those selling time-share. Most are pros at applying pressure on the weaker.