Consumers get the short end of the stick with the recent fed reversal
The U.S. Consumer Financial Protection Bureau (CFPB) has canceled a 2023 settlement with the financing arm of Toyota that had ordered the automaker’s division to pay a $12 million penalty to the federal government and $48 million to car buyers allegedly targeted by illegal lending practices since 2016. The allegations revolve around reports of Toyota illegally steering thousands of customers into expensive and unnecessary product bundles that many consumers were misled into believing were mandatory.
According to the CFPB, these product bundles, which added $700 to $2,500 to each loan, included Credit Life and Accidental Health (CLAH) coverage paying a loan’s remaining balance if the borrower passes away or becomes disabled, and Guaranteed Asset Protection (GAP), which waives some of the customer’s loan balance if their vehicle is totaled, but they still owe on the loan even with car insurance. During their investigation, the CFPB determined that Toyota Motor Credit made it unreasonably difficult for consumers to cancel the unwanted add-ons after customer complaints claiming the automaker forced the product bundles without their consent.
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Additionally, the CFPB found that Toyota’s financing arm failed “to ensure consumers received refunds of unearned GAP and CLAH premiums when they paid off their loans early or ended lease agreements early” and didn’t “provide accurate refunds to consumers who canceled their vehicle service agreements as a result of flawed system logic.” Lastly, the CFPB determined that Toyota’s finance division hurt victims’ credit by falsely reporting customer accounts as delinquent, even though consumers had already returned their vehicles, and failing to correct the information submitted to credit agencies promptly. “Toyota’s lending arm illegally withheld refunds, made borrowers run through obstacle courses to cancel unwanted services, and tarnished their credit reports,” former CFPB director Rohit Chopra said, according to Road & Track.
A rocky relationship with the current administration
The decision to drop the penalty may have something to do with the current administration’s recent actions. When asked whether he intended to “totally eliminate” the CFPB on February 10, President Trump said “that was a very important thing to get rid of,” according to Reuters. The current acting director of the CFPB, Russ Vought, who was appointed to the bureau by President Trump on February 7, sent an email to CFPB staff on February 8 directing employees not to issue any proposed or formal rules, stop pending investigations, not open new investigations, halt stakeholder engagements, and refrain from issuing public communications, according to CBS. Vought’s email occurred after Elon Musk’s Department of Government Efficiency (DOGE) thoroughly reviewed the CFPB.
In late February, lawyers for President Trump’s administration denied that the White House intends to dismantle the CFPB. However, on April 15, the Trump administration sent 1,500 of the CFPB’s 1700 total staff members layoff notices before a federal judge temporarily blocked the move on April 18, which remains in effect. The Wall Street Journal reports that Vought has served as Elon Musk’s lower-profile DOGE partner.
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Vincent Bray, Senior Manager of Corporate Communications at Toyota Financial Services, told Autoblog in response to the cancelled settlement: “Toyota Motor Credit Corporation (TMCC) appreciates the CFPB’s action, and we look forward to maintaining a good working relationship with the bureau. We remain committed to doing the right things for our customers and following applicable federal and state laws in our sales, customer service, and administrative practices. We will continue to enhance our practices to deliver the best possible customer experiences.”
Final thoughts
The CFPB’s decision to reverse its 2023 settlement order against Toyota’s financing arm reflects how President Trump’s policies are affecting the automotive industry and its consumers beyond the ripple effects of tariffs. Additionally, the CFPB’s cancellation of the settlement, which occurred on Monday, comes at a time when much of the bureau’s operations are in flux, raising more questions than answers regarding its reversal. The CFPB did not provide a reason for the settlement’s cancellation.