Toyota will pay up to $21.9 million to black and Asian borrowers to settle a federal discrimination probe.
The Consumer Financial Protection Bureau and the Department of Justice announced on Wednesday that in addition to the restitution paid to borrowers, Toyota Motor Credit Corporation would be required to reduce the amount loans can be marked up by dealers.
The settlement will give $19.9 million to borrowers who took out loans from January 2011 through January 2016. Toyota will also pay up to $2 million to black and Asian borrowers with markup disparities.
“Toyota’s reforms will level the playing field to ensure that all eligible borrowers – regardless of their race or national origin – can sign auto loans with fair terms and reasonable interest rates,” Vanita Gupta, the DOJ's assistant attorney general for civil rights, said in a statement.
“While dealerships deserve fair compensation for the valuable customer service they provide, federal law protects consumers against higher price markups simply because of what they look like or where they come from. We commend Toyota for crafting a new compensation system that strikes an appropriate balance for dealers and consumers.”
Federal investigators could not find direct links to racial discrimination, however, they found that black borrowers were paying 0.27 more for loans than whites with similar credit. Asian borrowers were paying 0.18 percent more than whites, the Los Angeles Times reports.
“We are dedicated to promoting fair and equal access to credit in the auto finance marketplace,” Richard Cordray, CFPB director, said of the investigation that kicked off in 2013. “Toyota Motor Credit is among the largest indirect auto lenders, and we commend its industry leadership in shifting to reduced discretion to address the significant fair lending risks.”
Toyota denied any wrongdoing in a statement by saying that the company “does not tolerate discrimination of any kind, even perceived or unintentional.”
The DOJ said that new policies must be in practice by August 2016.