Toyota’s Credit Business Takes a Hit As It Gets Fined $60M
Toyota Motor Corporation (TMC) recently got a blow to its credit business as its Toyota Credit business had to pay a fine of $60 million for saddling customers with overloaded loans. The company had to pay substantial amount of penalty to the Consumer Financial Protection Bureau (CFPB).
It was found that Toyota Pacific Corporation (TPCC) had been working on the sales and loans of cars for the past 10 years. Unfortunately, the credit company had provided financing deals to customers who did not have the ability to pay back the loans on time. The CFPB stated that they had observed debit payments and late fees which were higher than they should have been.
In a statement, the CFPB announced that the company had been working on a practice known as indirect auto financing. This practice basically involves the company exerting control regarding the amount of credit a borrower should receive. The CFPB states that since Toyota did not act in the best interests of their customers, this is a violation of the law and in turn, the company had to pay a fine worth $60 million.
The bureau also mentioned that this was not the only violation that the company had committed. They had been overcharging their customers for interest when it was bigger than the agreed amount. In addition, TPCC had been using vague language when it came to their payment plans, which had created confusion among customers. To make matters worse, the company kept a heavy hand when it came to their collections and repossessions.
The CFPB has stated that Toyota needs to improve their collection practices and repayment program to ensure customers are not victimized. In addition, the company needs to apply a timeline of 3 years to debtors, meaning the customer can pay their debt in 36 months. Toyota has accepted the punishment and they have also agreed to resolve any mistake they might have done in the future as well.
Toyota has committed itself to the problem to make sure that customers get the best services without any hassles. The company has also said that they will pay up the $60 million fine, without any interference from third-party sources.
The incident has sent shockwaves within TMC, and it is a good lesson for other companies to stay away from practices that are illegal and immoral towards customers. Toyota has to make sure that such issues never happen in the future, or else they might have to face hefty penalties.