Toyota Financial Services (TFS) has recently been fined $60 million by federal regulators for failing to live up to its loan customers’ terms.
TFS is a consumer credit arm of Toyota Motor Corp, that provides auto loans and leases to individuals and businesses. In September 19, 2019, the Federal Reserve found that TFS had violated the Consumer Financial Protection Act of 2010. The CFPB determined that TFS had approved more than 30,000 consumers for credit lines with loan terms that included borrowers being responsible for all consumer-protection rules and regulations. However, the Fed found that TFS had not properly informed customers of these terms.
The Federal Reserve noted that TFS had also allowed consumers to extend the duration of their loans by making additional payments over the initial term of the loan. This means many customers had taken out loans with terms that were more expensive and lasted longer than the approved terms.
These additional costs and longer loan terms have taken a financial toll on the borrowers, who now have to pay the extra cost on top of their loan balances. Additionally, the CFPB has ordered TFS to pay $21 million in refunds to customers who have been affected by their practices.
In a statement released by Toyota Financial Services, they apologized to their customers for the inconvenience they may have caused them and promised they will work hard to reduce the risk that this type of situation occurs again. The statement also announced that TFS had taken steps to improve their practices, such as creating new reporting procedures, creating investor checks, and enhancing customer service lines.
It remains to be seen if the $60 million fine is enough to ensure TFS will provide loans with terms that are in line with consumer protection regulations. It’s a reminder that financial institutions must be held accountable by consumers when it comes to their loan practices. It’s important to be aware of the terms of the loan when signing contracts and to understand the terms of any loan contract before signing.