Toyota Fined $60 Million for Illegally Adding Insurance to Car Loans

The auto lending arm of Japanese automaker Toyota illegally added insurance products on car loans, then purposely made removing those policies difficult for thousands of borrowers, a federal consumer watchdog agency said Monday.

The Consumer Financial Protection Bureau (CFPB) also accused Toyota Motor Credit Corporation of taking too long to issue refunds for those insurance lines once customers cancelled them. As a result, Toyota has agreed to pay a $60 million fine, $48 million of which will go directly to customers.

Employees at Toyota dealerships often tacked on guaranteed asset protection and credit life and accidental health insurance policies, which added between $700 and $2,500 extra to each auto loan, CFPB officials said. Employees lied about those insurance products being mandatory or rushed borrowers through the paperwork, the agency said. That allowed Toyota to tack on higher finance charges to car loans, the agency said.

Customer Complaints against Toyota Motor Credit

According to the Consumer Financial Protection Bureau (CFPB), thousands of consumers have lodged complaints against Toyota Motor Credit. These complaints allege that dealers deceived customers regarding the mandatory nature of certain products, included them in contracts without their knowledge, or hurriedly completed paperwork to conceal hidden terms.

The CFPB further stated, "Nevertheless, Toyota Motor Credit devised a scheme to retain the revenue from these products by making it extremely cumbersome to cancel, and then failed to provide proper refunds for consumers who succeeded in cancelling."

Customer made to run "obstacle courses"

Customers who wished to remove these policies were directed to call a special hotline. However, representatives manning the hotline were instructed to dissuade borrowers from canceling the products. The CFPB revealed that hotline representatives would only cancel the products after customers had requested it three times. Additionally, customers were required to submit written cancellation requests.

The CFPB did not disclose the duration of Toyota's engagement in these practices. However, they did mention that over 118,000 customer calls were directed to the hotline between 2016 and 2021. CFPB officials also highlighted instances where customers who canceled insurance policies and requested refunds did not receive the correct amount.