The state of Massachusetts accused Toyota's credit division of taking part in illegal loan practices.
Toyota's automotive financial division, Toyota Motor Credit Corp. (TMCC), has settled with the state of Massachusetts for $7.6 million over allegations it took part in illegal loan practices, though the automaker denies any wrongdoing.
Per Automotive News, the state's Attorney General, Andrea Joy Campbell, announced the settlement late last week. Massachusetts alleges that TMCC "failed to give certain consumers sufficient information about the calculation methods for deficiencies left on their auto loans after their cars were repossessed."
Even after a vehicle is repossessed, the customer still has to pay the balance of the loan, called the deficiency. The settlement also alleged the financial division broke the state's debt collection rules when it made "excessive collection calls to certain consumers."
The Attorney General's office has confirmed that the $7.6 million settlement also includes $5.5 million in debt relief for over 500 consumers throughout the state. The rest of the settlement money will be put towards paying for the cost of the investigation, administering agreement expenses, and some direct payments to borrowers.
"It is our hope that the debt waiver and funds secured through this settlement will assist hundreds of residents in getting the relief they need and deserve - and build on our efforts to provide economic opportunity to families across Massachusetts," Campbell said.
The report did not provide details regarding which Toyota models were involved, but it's fair to assume that it's a broad range, from the least expensive Corolla to fully-loaded Tundras.
"Consumers facing repossession and collection actions on their vehicles deserve clear and transparent information from auto lenders," the state's top attorney said in a written statement. Unfortunately, America's auto repossession rates continue to climb.
Last month, we reported the number of subprime auto borrowers in December 2022 who were at least 60 days behind on their payments had increased by nearly 6%. That's up from a seven-year low of just 2.58% in April 2021.
Why is this happening now? Partially because of the cooling job market, high inflation, high used car prices, and other industry-related problems that can be blamed on the pandemic.
Join The Discussion