Toyota Financial Services reached a “voluntary” resolution with the Consumer Financial Protection Bureau and the Department of Justice today, to address the alleged discriminatory practices in loan pricing, the captive announced.
According to the agreement, TFS will invest $22 million in a fund to be distributed to affected borrowers. Additionally, TFS will limit its dealer participation cap to 125 basis points for loans with 60 month terms, and 100 basis points for loans with longer terms.
“TMCC denies any wrongdoing and notes that this voluntary agreement does not include an assessment of civil money penalties,” the captive said in a press release. “As an indirect lender, TMCC has no visibility into the race or ethnicity of its customers or credit applicants, and these factors have no bearing on the company’s credit or pricing decisions.”
TFS reported that the two agencies were prepared to take action against the captive, in an 8-K filed with that the Securities and Exchange Commission in late 2014.
In their initial letter to the lender, the CFPB and DOJ alleged that the captive’s pricing “practices resulted in discriminatory pricing of loans to certain borrowers in contravention of applicable laws,” according to the filing. The regulators also informed the company that they are prepared to initiate an enforcement proceeding unless TFS agrees to a voluntary resolution, satisfactory to the agencies.
