Toyota Motor Credit Class Action Takes Issue with ‘Gap’ Protection

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Toyota Motor Credit Corporation is facing a class action lawsuit alleging it breaches its contracts with consumers regarding “gap” protection for vehicle financing.

Toyota Motor Credit Corporation (TMCC) is a company that provides financing to consumers so they can purchase vehicles from an auto dealer.

When the consumer purchases the vehicle, the consumer enters into a retail installment contract with the dealer, and the dealer assigns that contract to TMCC.

Retail installment contracts typically state that the borrower will make periodic payments to the lender for a specified period of time. The RIC also indicates the principal, interest rate, total amount financed and other various charges that are part of the financing plan.

According to the class action lawsuit, TMCC also provides purchasers with the option to purchase “gap” protection, which is a contract that covers the difference between what the insurance carrier will pay and what the consumer actually owes on the car if the car is totaled in an accident.

Plaintiff Marian J. Mensie says she purchased a new Toyota RAV4 in June 2014 that was financed through TMCC for a total of about $41,900. According to the TMCC class action lawsuit, she also paid a separate charge of $695 for gap protection.

In April 2015, Mensie’s RAV4 was reportedly involved in an accident. Her auto insurance company declared the vehicle a total loss and paid TMCC $24,431.45, the value of the vehicle at the time of the accident. Mensie reportedly still owed TMCC approximately $38,100 for the vehicle under the RIC.

“TMCC refunded Ms. Mensie approximately $4,000 for the unused portion of a Mechanical Repair Agreement and a Prepaid Maintenance Agreement,” the TMCC class action lawsuit states. “Thus, there existed an approximate $10,000 ‘gap’ between the $34,100 Ms. Mensie owed TMCC under her RIC and her ‘the actual cash settlement’ from American Family in the amount of $24,431.45.”

However, TMCC did not waive Mensie’s liability for the $10,000 “gap,” the TMCC class action lawsuit says. Instead, the lender waived $7,997.48 and informed Mensie that she was liable for the remaining $2,328.42 owed under the RIC.

Mensie has filed the TMCC class action lawsuit on behalf of herself and a Class of other persons who purchased a TMCC gap contract on or after July 1, 2009. She also seeks to represent an Arkansas subclass. She asserts TMCC breached its gap contract by refusing to fully waive borrower liability in situations involving total loss.

The TMCC class action lawsuit asserts claims for breach of contract and violation of the Arkansas Deceptive Trade Practices Act. Mensie has demanded a jury trial for the case.

Mensie is represented by Michael B. Phillips and Brandon K. Moffitt of Moffitt & Phillips PLLC, Robert A. Horn and Joseph A. Kronawitter of Horn Aylward & Bandy LLC, and Brian Timothy Meyers and Brian C. McCart of the Law Offices of Brian Timothy Meyers.

The Toyota Motor Credit Corporation Class Action Lawsuit is Marian J. Mensie v. Toyota Motor Credit Corporation, Case No. 4:17-cv-00085-DPM, in the U.S. District Court for the Eastern District of Arkansas, Western Division.