Toyota Financial Services announced that the Consumer Financial Protection Bureau and U.S. Department of Justice are prepared to take action against the captive. The action relates to its auto finance practices, which the agencies allege led to discriminatory pricing of loans. The anticipated action was announced in an 8-K filed with the Securities and Exchange Commission on Friday.
In their most recent letter to the lender, the CFPB and DOJ allege that “such 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.
Toyota Financial Services, along with Fifth Third Bank and American Honda Finance Corp., originally revealed in May that it had received a letter from the CFPB, which, together with the DOJ, requested it provide certain information about the purchases of auto finance contracts from dealers and discretionary pricing practices. However, at that time, TFS indicated that it was “uncertain whether we will be subject to regulatory actions, and given the preliminary state of this inquiry, we are unable to estimate the amount or range of potential loss in the event any such actions are taken.”
In last week’s SEC filing, the company wrote, “The Agencies have indicated that they are seeking monetary relief and implementation of changes to our discretionary pricing practices and policies, which changes could adversely affect our business. We intend to continue to cooperate with the Agencies to achieve a mutually satisfactory resolution.”
In addition to the filing, a spokesman from TFS told Auto Finance News that it had issued the following statement, in which the company says it has already taken action to meet CFPB expectations.
To help realize our shared consumer protection and regulatory compliance goals, Toyota Financial Services has activated a stronger, more robust Compliance Management System (CMS) over the past two and a half years. Our intent is that these measures will contribute to a solution that meets the CFPB’s expectations and allows us to better serve our customers. In the meantime, and in keeping with our commitment to fair and responsible lending practices, it is important for our customers to know that we do not track the race or ethnicity of our customers or credit applicants, and these factors never influence our credit or pricing decisions.
