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Massachusetts Attorney General In $7.6 Million Settlement With Toyota Credit

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Toyota Motor Credit Corp. will pay $7.6 million to settle allegations brought by the office of Attorney General Andrea Campbell that it engaged in unfair lending practices.

Much of that money — about $5.5 million — will go toward wiping out debts owed to Toyota by as many of 500 borrowers in Massachusetts, according to the attorney general’s office.

The balance of $2.1 million will go toward paying for the years-long investigation by the attorney general’s office, costs of implementing the agreement, and some direct payments to borrowers, according to the attorney general’s office.

The Toyota agreement is the latest in an ongoing and wide-ranging investigation by the attorney general’s office into “unfair and predatory collection practices” by lenders and those who service their loans.

Two previous settlements — against Credit Acceptance Corp. and Santander Consumer USA — netted more than $30 million.

The allegations against Toyota center on the way the lender communicated with its borrowers after they defaulted on their loans and their vehicles were repossessed.

One allegation was that Toyota violated consumer protection regulations that prohibit creditors like Toyota from contacting debtors more than twice in a seven-day period.

The other allegation involves the adequacy of notice Toyota gave debtors about the status of their loans after repossession. Repossession of a vehicle doesn’t necessarily wipe out a debt, and how much is still owed may depend on how the value of the repossessed vehicle is calculated.

Among the complicating factors in calculating outstanding debt are whether the repossessed vehicle is valued by fair market value or by the amount it sells for at auction.

Toyota “failed to give certain consumers sufficient information about the calculation methods,” according to the attorney general’s office.

“This type of information can be helpful to consumers determining how to best respond to a lender’s collection efforts,” according to the attorney general’s office.

“Consumers facing repossession and collection actions on their vehicles deserve clear and transparent information from auto lenders,” said Campbell, according to a press release.

“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,” she said.

The office of the attorney general alleged Toyota’s unfair practices date back to 2017, but that Toyota “has represented … that it has substantially adopted compliant practices … as of at least August 2018.”

In an agreement filed in Suffolk Superior Court on Jan. 17, Toyota agreed to accept the settlement “without admitting any facts, liability, or wrongdoing, in the interest of resolution of this matter and for settlement purposes only.”

Toyota, in a statement released in response to the settlement, said it is “committed to doing what’s right for our customers. The company strives to consistently follow all state laws in our sales, customer service, and administrative practices.”

“In settling with the state of Massachusetts, TMCC admits to no wrongdoing,” it said. “In 2018, TMCC revised our post-repossession notices to comply with the court’s interpretation of the state statute.”

In 2019, Credit Acceptance Corp., a national subprime auto lender, agreed to pay more than $27 million to settle a lawsuit brought by then-Attorney General Maura Healey, who was elected governor last year. At the time, It was the largest settlement of its kind.

That settlement made more than 3,000 borrowers eligible for debt relief and credit repair.

Last year, Santander Consumer USA, another subprime auto lender, agreed to pay $5.56 million to resolve allegations that “it did not provide sufficient disclosures to consumers as it pertains to the company’s auto loan debt collection practices,” according to the attorney general’s office.

Borrowers eligible for relief under the Toyota settlement will be contacted by the attorney general’s office or can contact the office for more information at 617-963-2220.

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