Toyota Motor Credit has been accused of establishing a pattern of “discriminatory pricing of loans to certain borrowers,” according to a recent Securities and Exchange Commission form 8-K filing, first spotted by Reuters.
“[The Department of Justice and the Consumer Financial Protection Bureau] are prepared to initiate an enforcement proceeding unless we agree to a voluntary resolution satisfactory to them,” the document adds. “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.”
The CFPB earlier this year claimed that many auto lenders have been charging higher interest rates for certain lenders, even if the applicants qualify for better loan terms. Charging higher interest rates is not illegal, however the agencies suggest some lenders are violating anti-discrimination laws by disproportionately targeting minorities when pushing such loans.
The agency already squeezed a $98 million settlement out of Ally Financial, formerly General Motors’ lending division. Smaller players have also been forced to pay a collective total of $56 million in compensation.
The problem is partially blamed on individual dealers’ discretion in loan rate markup, however the CFPB has called for lenders to implement a system to monitor practices and prevent discrimination. Eliminating dealer discretion during the loan application process has been proposed as one strategy to help bring practices into compliance.
The DoJ and CFPB have not publicly announced a settlement or other action taken against Toyota Motor Credit.
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