Toyota's financing arm will pay nearly $22 million to settle allegations that dealerships unfairly discriminated against minority auto loan recipients.
Investigations by the Justice Department and the Consumer Financial Protection Bureau found that the automaker's financing system resulted in black and Asian borrowers paying hundreds more than qualified white borrowers.
The settlement involves Toyota Motor Credit, a subsidiary of Toyota Motor Corporation that indirectly finances auto loans through car dealerships.
Dealerships are allowed to vary interest rates based on objective credit-related factors, but the federal investigation alleged that rates were instead increased for thousands of borrowers based on race or national origin.
The average African-American discrimination victim was required to pay in excess of $200 more during the term of the loan; average Asian/Pacific Islander victims paid more than $100.
“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," said Vanita Gupta, head of DOJ's Civil Rights Division.
The settlement requires Toyota to pay $19.9 million to victims of discrimination between January 2011 and January 2016, along with up to $2 million to resolve disparities in place until new borrowing policies are implemented.
The agreement limits dealer markups to 1.25 percentage points for loans of 60 months or less and 1 percentage point for longer loans.
Toyota is also required to improve its monitoring and compliance systems and will report additional efforts to reduce discrimination to investigators.
The new policies must be in place by August.
Federal investigators commended Toyota for its cooperation on the case.
Toyota Motor Credit, however, disputed the investigations' methodology and denied any wrongdoing since, as an indirect lender, it doesn't view applicants' race or ethnicity.
The company added that the settlement did not include a civil penalty.
"TMCC does not tolerate discrimination of any kind, even perceived or unintentional, from its employees or business partners — this principle extends to fair lending practices," the company said in a statement.