In a recent development, Toyota has agreed to compensate its customers from being over-charged. Car dealers charges Black, Asian and Pacific Islander customers more than Caucasian customers. The additional cost for Toyota Sales was called "dealer markup."

Toyota's auto-loan department has recently announced that they will be compensating Black, Asian and Pacific Islander customers that were charged with higher interest rates than white borrowers. The agreed amount of compensation totaled to $21.9 million.

The deal came about after the United States Consumer Financial Protection Bureau and the Department of Justice investigated the vehicle company back in 2013 due to unfair pricing complaints. 

Evidence showed that diverse borrowers were asked to pay over $100 more in interest rates compared to a white borrower. This misleading practice went on between 2011 and 2016.

The discrimating practice called the fees a "dealer markup" where dealers were allowed to earn more in the expense of cultural minorities in the region. Toyota had allowed its car dealers to increase prices up to 2.5% and it will continue to add up when interest grows over the years.

In addition to the agree $21.9 million compensation towards its customers, the company also agreed to reduce the markup their dealers can create. Markups will be capped at 1.25% when it comes to 5 year loans and 1% for longer. It looks like the discriminatory practice cannot be eradicated but somehow this settlement limits it. 

Toyota has clarified its stance on the situation. Toyota Motor Credit Corporation denies that they were involved in any wrong-doing and further expressed that it does not tolerate discrimination. 

In response to Toyota's statement, the CFPB clarifies that the lender did not intentially discriminate custoemrs but rather its discretionary pricing and compensation policies results in discriminating outcomes. 

How did it work? The dealers offer in-house financing. And when a customer chooses that route, the dealer sends the buyer's credit score and other loan risk factors to, in this case Toyota Motor Credit Corporation. The dealer learns the rates the buyer has qualified for, but then is allowed increase it, as the dealer sees fit.