Toyota Motor Credit settles over US racial bias allegations

The Toyota Motor Credit Corporation will pay up to USD 21.9 million to minorities who paid higher interest rates than whites for their auto loans as part of a settlement with US federal regulators, officials said.
The settlement, announced yesterday, stems from a joint investigation by the Department of Justice and the Consumer Financial Protection Bureau (CFPB) that began in 2013.
"The investigation did not find that Toyota Motor Credit intentionally discriminated against its customers, but rather that its discretionary pricing and compensation policies resulted in discriminatory outcomes," the CFPB said in a statement.
On average, African Americans paid USD 200 more for their auto loans than whites, while Asian and Pacific Islanders were charged over USD 100 more on average, it said, adding that thousands of people were affected.

Indirect auto lenders such as Toyota Motor Credit permit car dealers to increase interest rates, "giving them the discretion to charge consumers different rates regardless of consumer creditworthiness," according to the CFPB.
It said that Toyota Motor Credit allowed dealers to mark up interest rates by as much as 2.5 per cent.

Toyota Motor Credit said it does not tolerate discrimination of any kind and stressed it had no access to information regarding the race of customers.
"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," it said in a separate statement.

As part of the settlement, it agreed to cap dealer discretion to mark up interest rates.
The Toyota Motor Credit Corporation is the US financing arm of Toyota Financial Services, a subsidiary of the Toyota Motor Corporation.