Discretionary Commission Arrangements - Complaints and Refunds
Toyota Financial Services (TFS), officially known as Toyota Motor Credit Corporation (TMCC), represents the financial arm of Toyota, offering a broad spectrum of financial products and services to Toyota customers and dealerships. Established in the early 1980s, TFS has grown significantly, from approving its first finance contract for a used Toyota Corolla in Denver, Colorado, in 1983, to becoming a global powerhouse in automotive finance (Toyota Financial) (Toyota Pressroom).
TFS is dedicated to service excellence, with a passionate commitment to helping millions of Toyota customers drive the vehicle of their dreams through flexible financing and leasing options, along with voluntary protection products and comprehensive auto insurance offerings. Over the decades, TFS has built a strong foundation of trust and reliability with its customers and dealers, inspired by the exceptional quality of Toyota vehicles (Toyota Financial).
Globally, Toyota's financial services span more than 35 countries and regions, reflecting the company's commitment to enabling more customers to enjoy Toyota vehicles. This is achieved by promoting digitization, developing new financial products, and expanding its network, especially in growing automotive markets (Global Toyota). Toyota Financial Services Corporation (TFSC) supports Toyota's vision by participating in motorsport events such as the World Rally Championship (WRC) 2023 with the TOYOTA GAZOO Racing Team, showcasing the brand's commitment to excellence beyond traditional financial services (TFSC).
The organization has played a pivotal role in Toyota's global expansion, establishing various financial services entities worldwide from the 1980s through to the 2000s. This includes entities in Australia, the United Kingdom, New Zealand, Canada, and many other countries, signifying Toyota's strategic focus on leveraging financial services to bolster car sales and brand loyalty across diverse markets (Toyota Global).
TFS employs over 3,200 team members across the United States, with customer service centers in Chandler, Arizona; Cedar Rapids, Iowa; and Owings Mills, Maryland, emphasizing the importance of direct and efficient customer service (Toyota Pressroom). The organization's evolution reflects Toyota's broader shift towards becoming a mobility company, aiming to enhance customers' lives through a variety of financial solutions that facilitate the joy and freedom of movement (Global Toyota).
In conclusion, Toyota Financial Services is more than just a financial institution; it is a key enabler of Toyota's global automotive sales and a testament to the company's commitment to innovation, customer satisfaction, and the pursuit of a better future mobility society. Through strategic expansion, customer-focused financial products, and a relentless drive for service excellence, TFS plays a crucial role in Toyota's ongoing success and its vision for the future.
The UK side of Toyota Financial Services (TFS), like its global operations, offers a comprehensive range of finance and insurance products tailored to Toyota and Lexus customers and dealers. In the UK, TFS operates under the stringent regulatory framework of the Financial Conduct Authority (FCA), ensuring its services align with local financial service guidelines and consumer protection laws.
A significant development affecting Toyota Financial Services UK and other motor finance providers is the FCA's decision to ban discretionary commission models. This decision, confirmed in a policy statement (PS20/8) issued on July 28, 2020, targets commission models that allow brokers or dealers to adjust the interest rate on a customer's finance agreement, thereby influencing their own commission from the finance provider. The model had been identified as creating an incentive for brokers to act against customers' interests by potentially increasing the interest rate to earn higher commissions (Financial Conduct Authority) (Financial Conduct Authority).
The FCA's ban on these models is aimed at increasing competition and protecting consumers by eliminating the financial incentive for brokers to raise the interest rate a customer pays. It is expected that this move will save customers approximately £165 million a year. The implementation of this ban necessitates significant adjustments in the operational and sales practices of firms like Toyota Financial Services UK. They, along with other motor finance firms, were given until January 28, 2021, to comply with the new regulation, despite the operational pressures faced by the sector at the time, including those related to the COVID-19 pandemic (Financial Conduct Authority).
Deloitte UK outlines the implications of the FCA's policy changes, suggesting firms need to undertake comprehensive reviews of their commission arrangements, operational capacities for handling increased complaint volumes, and ensure robust technology and processes are in place for efficient and controlled processing of complaints. The adjustments include revising communication and engagement plans to keep customers adequately informed and undertaking file review activities to support firms' data analysis and understand customer impacts (Deloitte).
For Toyota Financial Services UK, adapting to these regulatory changes would involve reevaluating their commission structures, enhancing their complaint management capabilities, and ensuring transparency in their financial product offerings. The overarching goal is to align with the FCA's objectives of promoting fair competition and safeguarding consumer interests, potentially reshaping the landscape of motor finance in the UK.
This regulatory shift marks a transformative period for the motor finance industry, including Toyota Financial Services UK, compelling them to innovate and possibly redefine their business models to sustain growth and customer trust in a more regulated financial environment.