Consumer complaint received 2024-02-02
Product: Credit reporting or other personal consumer reports — Credit reporting
Issue: Problem with a company's investigation into an existing problem — Their investigation did not fix an error on your report
Company: TOYOTA MOTOR CREDIT CORPORATION (NJ)

Attention Legal Department/Office of the President : To Whom It May Concern, I am in receipt of your correspondence dated XX/XX/XXXX in which you failed to address and properly investigate a complaint against your corporation specifically regarding the mishandling of securities and potential securities fraud. Therefore, I am writing to express my deep concerns regarding the non-performance of TOYOTA FINANCIAL SERVICES ( " TFS '' ) /TOYOTA MOTOR CREDIT CORPORATION ( " TMCC '' ), and XXXX XXXX XXXX XXXX XXXX XXXX , in its capacity as the fiduciary/indenture trustee for their accounts receivables and asset backed securities held in Trust. As a beneficiary, it has come to my attention that the company 's actions and decisions have fallen short of the standards expected in the fiduciary role. 

As you are undoubtedly aware, the fiduciary duty is a critical responsibility that demands the highest level of care, loyalty, and prudence in managing the assets and affairs of the trust for the benefit of its beneficiaries. It is a legal and ethical obligation to act in the best interests of those who entrust their financial well-being to the fiduciary. 

Regrettably, I have observed several instances where TFS, TMCC and its affiliates, appears to have deviated from the expected fiduciary standards. These concerns include specific issues, such as inadequate communication, poor investment decisions, delays in distributions, breach of trust, breach of contract and breach of fiduciary duty as trustee. Such deviations not only jeopardize the financial interests of the beneficiaries but also erode the trust and confidence placed in TFS, TMCC and its affiliates. 

I would like to draw your attention to the fact that the duties and obligations of a fiduciary are legally binding, and any failure to fulfill these responsibilities may result in legal consequences. It is imperative that TFS, TMCC and its affiliates rectify the aforementioned issues promptly and demonstrate a renewed commitment to upholding its fiduciary obligations. 

I kindly request that you provide a comprehensive explanation of the actions being taken to address the concerns raised. Transparency and open communication are essential in rebuilding trust, and it is crucial for TFS, TMCC and its affiliates, to keep beneficiaries informed about the steps being taken to rectify the situation. 

Moreover, TFS and TMCCs erroneous and ill-considered response to my Consumer Financial Protection Bureau ( CFPB ) complaint dated XX/XX/XXXX, Complaint ID # XXXX reads as follows : In response to your concerns regarding securitization transactions, please be advised that we have reviewed your concerns and deemed them to be without merit. The lease agreement that you entered into on XX/XX/XXXX is a valid and an enforceable contract under which we legally enforced our rights. 

Furthermore, the unpaid account balance in the amount of {$4400.00} was charged off on XX/XX/XXXX, and, as a result, the delinquent status of the account was reported to the consumer reporting agencies ( CRAs ). 

Upon review of my credit profile and most recent credit report, I have noticed that the TFS/TMCC charged-off account is inaccurately reflected, and I am demanding its full suppression and deletion based on specific legal grounds. According to the Internal Revenue Service ( IRS ) guidelines and federal case law, charge-offs are considered taxable income. Did TFS, TMCC or its affiliates receive a tax credit from the IRS by this account being charged-off? In accordance with federal taxation statutes and established case law, income is defined as an accession to wealth, clearly delineated under the Sixteenth Amendment of the United States Constitution. Furthermore, case law, such as the landmark Supreme Court case Commissioner v. XXXX XXXX XXXX ( XXXX XXXX XXXX ), solidifies the principle that income encompasses any accession to wealth, regardless of source, and is subject to taxation unless explicitly exempted by law. Given the aforementioned legal precedent and IRS classification of charge-offs as taxable income, it is evident that reporting charged-off accounts as part of one 's credit profile is erroneous and misleading. Charge-offs do not reflect ongoing financial obligations or active credit balances but rather constitute a tax consequence that is separate from the creditworthiness of an individual. 


The following Notes have been directly extracted from TFS/TMCCS XX/XX/XXXX XXXX report filed with the Securities and Exchange Commission ( SEC ) : Note 2 Investments in Marketable Securities Investments in marketable securities consist of debt securities and equity investments. We classify all of our debt securities as available-for-sale ( AFS ). Except when the fair value option is elected, AFS debt securities are recorded at fair value with unrealized gains or losses included in accumulated other comprehensive income ( AOCI ), net of applicable taxes. Interest income is recognized on an accrual basis and determined using the effective interest method. Realized gains and losses from sales of AFS debt securities are determined using the specific identification method or first in first out method. Dividend income, interest income, and realized gains and losses from the sales of AFS debt securities are included in Investment and other ( loss ) income, net in our Consolidated Statements of Income. 

A portion of our equity investments are investments in funds that are privately placed and managed by an open-end investment management company ( the Trust ). If we elect to redeem shares, the Trust will normally redeem all shares for cash, but may, in unusual circumstances, redeem amounts exceeding the lesser of {$250.00} XXXX or XXXX percent of the Trusts asset value by payment in kind of securities held by the respective fund during any 90-day period. We also invest in actively traded open-end mutual funds. Redemptions are subject to normal terms and conditions as described in each funds prospectus. 

Note 3 Finance Receivables, Net Finance receivables, net consists of the retail loan and dealer products portfolio segments, and includes deferred origination costs, deferred income, and allowance for credit losses. Finance receivables, net also includes securitized retail receivables, which represent retail receivables that have been sold for legal purposes to securitization trusts but continue to be included in our consolidated financial statements, as discussed further in Note 8 Variable Interest Entities. Cash flows from these securitized retail receivables are available only for the repayment of debt issued by these trusts and other obligations arising from the securitization transactions. They are not available for payment of our other obligations or to satisfy claims of our other creditors. 

Note 5 Investments in Operating Leases, Net Investments in operating leases, net consists of vehicle lease contracts acquired from dealers, and includes deferred origination fees and costs, deferred income, and accumulated depreciation. Securitized investments in operating leases represent beneficial interests in a pool of certain vehicle leases that have been sold for legal purposes to securitization trusts but continue to be included in our consolidated financial statements as discussed further in Note 8 - Variable Interest Entities. Cash flows from these securitized investments in operating leases are available only for the repayment of debt issued by these trusts and other obligations arising from the securitization transactions. They are not available for payment of our other obligations or to satisfy claims of our other creditors. 

Note 7 Debt and Credit Facilities ; Secured Notes and Loans Payable Our secured notes and loans payable are denominated in U.S. dollars and consist of both fixed and variable rate debt. Secured notes and loans payable are issued using on-balance sheet securitization trusts, as further discussed in Note 8 Variable Interest Entities. These notes are repayable only from collections on the underlying securitized retail finance receivables and the beneficial interests in investments in operating leases and from related credit enhancements. Some of our secured notes are backed by a revolving pool of finance receivables and cash collateral, with the ability to repay the notes in full after the revolving period ends, after which an amortization period begins. 

Note 8 Variable Interest Entities Consolidated Variable Interest Entities We use one or more special purpose entities that are considered Variable Interest Entities ( VIEs ) to issue asset-backed securities to third-party bank-sponsored asset-backed securitization vehicles and to investors in securitization transactions. The securities issued by these VIEs are backed by the cash flows related to retail finance receivables and beneficial interests in investments in operating leases ( Securitized Assets ). We hold variable interests in the VIEs that could potentially be significant to the VIEs. We determined that we are the primary beneficiary of the securitization trusts because ( i ) our servicing responsibilities for the Securitized Assets give us the power to direct the activities that most significantly impact the performance of the VIEs, and ( ii ) our variable interests in the VIEs give us the obligation to absorb losses and the right to receive residual returns that could potentially be significant. 

Note 8 Variable Interest Entities ( Continued ) The transfers of the Securitized Assets to the special purpose entities in our securitizations are considered to be sales for legal purposes. However, the Securitized Assets and the related debt remain on our Consolidated Balance Sheets. We recognize financing revenue on the Securitized Assets and interest expense on the secured debt issued by the special purpose entities. We also maintain an allowance for credit losses on the securitized retail finance receivables using a methodology consistent with that used for our non-securitized asset portfolio. The interest rate swaps between TMCC and the special purpose entities are considered intercompany transactions and therefore are eliminated in our consolidated financial statements. 

Note 12 Fair Value Measurements ( Continued ) Accrued interest related to finance receivables is in Other assets on the Consolidated Balance Sheets ; however, TMCC measures the fair value of each class of finance receivables using scheduled principal and interest payments. Therefore, accrued interest has been included in the carrying value of each class of finance receivables in the previous tables, along with the finance receivables, deferred origination costs, deferred income, and allowance for credit losses. 

On page XXXX, TFS/TMCC states the following : We may borrow from affiliates on terms based upon a number of business factors such as funds availability, cash flow timing, relative cost of funds, and market access capabilities. Amounts borrowed from affiliates are recorded in Other liabilities on our Consolidated Balance Sheets and are therefore excluded from Debt amounts. 

Secured Notes and Loans Payable Asset-backed securitization of our earning asset portfolio provides us with an alternative source of funding. We regularly execute public or private securitization transactions. 

We securitize finance receivables and beneficial interests in investments in operating leases ( Securitized Assets ) using a variety of structures. Our securitization transactions involve the transfer of Securitized Assets to bankruptcy-remote special purpose entities. These bankruptcy-remote entities are used to ensure that the Securitized Assets are isolated from the claims of creditors of TMCC and that the cash flows from these assets are available solely for the benefit of the investors in these asset-backed securities. Investors in asset-backed securities do not have recourse to our other assets, and neither TMCC nor our affiliates guarantee these obligations. 

On page XXXX, TFS/TMCC states the following : We are not required to repurchase or make reallocation payments with respect to the Securitized Assets that become delinquent or default after securitization. As seller and servicer of the Securitized Assets, we are required to repurchase or make a reallocation payment with respect to the underlying assets that are subsequently discovered not to have met specified eligibility requirements. This repurchase obligation is customary in securitization transactions. With the exception of our revolving asset-backed securitization program, funding obtained from our securitization transactions is repaid as the underlying Securitized Assets amortize. 

We service the Securitized Assets in accordance with our customary servicing practices and procedures. 
Our servicing duties include collecting payments on Securitized Assets and submitting them to a trustee for distribution to security holders and other interest holders. We prepare monthly servicer certificates on the performance of the Securitized Assets, including collections, investor distributions, delinquencies, and credit losses. We also perform administrative services for the special purpose entities. 

Our use of special purpose entities in securitizations is consistent with conventional practice in the securitization market. None of our officers, directors, or employees hold any equity interests or receive any direct or indirect compensation from our special purpose entities. These entities do not own our stock or the stock of any of our affiliates. Each special purpose entity has a limited purpose and generally is permitted only to purchase assets, issue asset-backed securities, and make payments to the security holders, other interest holders and certain service providers as required under the terms of the transactions. 

As beneficiary and a certified investor of TFS, TMCC and its affiliates, it is quite alarming and concerning that they would operate in such a untruthful, deceitful and financial malfeasance manner. Is or was there ever really a due balance? Are those credits due back to the Principal and Beneficiary from TFS/TMCC making investments on their behalf? Sounds like unjust enrichment and securities fraud if the Principal and Beneficiary received absolutely no benefit from those actions. 

I trust that TFS, TMCC and its affiliates, will take this matter seriously and implement the necessary measures to ensure that its fiduciary duties are fulfilled with the utmost diligence and in the best interests of their investors and beneficiaries. Your prompt attention to this matter is appreciated, and I look forward to hearing back from you within a reasonable timeframe with a fair and reasonable settlement offer, no longer than 30 days from receipt of this notice.