Yahoo Finance Toyota (TM) to Pay $60M Fine for Illegal Lending Practices
Toyota TM has been charged for illegally preventing car buyers from canceling add-ons to their loans that increased their monthly loan payments and deteriorated buyer’s credit reports. The automaker will pay $60 million in fines to settle this U.S. regulator's charges.
Per the Consumer Financial Protection Bureau (“CFPB”), Toyota Motor Credit will pay a $12 million civil fine and $48 million to the harmed consumers since 2016.
Toyota Motor Credit provides vehicle financing to customers who buy vehicles from Toyota dealerships.
The settlement is concerned with add-on products that cost the buyers nearly $700-$2,500 per loan. The add-ons provide protection when vehicles are damaged, stolen or out of warranty and in case the buyer dies or becomes disabled.
Per CFPB, the borrower complained to Toyota Motor Credit that dealers misinformed them about the necessity of the product and rushed them through paperwork, because of which they didn’t realize how much they were paying.
Per the Regulator, Toyota Motor Credit made canceling the bundle extremely difficult for the borrower. It routed over 118 thousand borrowers to a hotline where agents were instructed to dissuade cancellations and often failed to provide refunds.
Toyota Motor Credit is also accused of violating the Fair Credit Reporting Act by misinforming credit reporting agencies and failing to correct the misinformation for more than 27,500 borrowers.
Under a consent order, Toyota Motor Credit has agreed to simplify the cancelation of unwanted product bundles. It also agreed to closely monitor dealers' conduct to make sure that employee pay and performance metrics do not depend on the sales of the bundles.
Per Toyota Motor Credit’s statement, the company is committed to taking the right action for its customers and strives to consistently follow all federal and state laws in its sales, customer service and administrative practices.
Zacks Rank & Key Picks
TM currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked players in the auto space are Volvo VLVLY and BYD Company Limited BYDDY, each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VLVLY’s 2023 sales and earnings indicates year-over-year growth of 4.2% and 65.6%, respectively. The EPS estimates for 2023 and 2024 have increased by 28 cents and 13 cents, respectively, in the past 30 days.
The Zacks Consensus Estimate for BYDDY’s 2023 sales indicates year-over-year growth of 160.2%. The EPS estimate for 2024 has increased by 10 cents in the past 30 days.
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