Driven in part by a weak economic recovery, subprime auto lenders are turning to new technology in hopes that they can collect overdue debts sooner. But borrowers are critical, saying they feel "helpless" and as though lenders can now do "whatever they want."
Certain lenders are having dealers install GPS tracking devices on borrowers' cars. They've been called starter interrupt devices because lenders can use their computers or smartphones to signal the device and thus prevent borrowers' cars from starting if a payment is missed. In addition, lenders can track where borrowers' cars are located if repossession is necessary.
The New York Times reported that the devices are being used in about one-quarter of U.S. subprime auto loans. That means about 2 million cars now have the technology installed.
While one might assume lenders would only use the tactic as a last resort, some borrowers have reported their cars being disabled when their payments were only a few days past due.
For borrowers, the newly-implemented practice can ruin a day, a week, or perhaps even a month or more. But for lenders, it seems like another routine task.
“I have disabled a car while I was shopping at Walmart,” Lionel M. Vead Jr., who heads collections for First Castle Federal Credit Union in Covington, Louisiana, told the Times.
Vead is able to disable ignitions and track the locations of about 880 borrowers' cars. But he said he'll only use the technology if the borrower can't be reached by phone or email and the payment is more than 30 days overdue. If there's an emergency, he said he'll turn the car back on.
Other lenders apparently aren't so lenient.
Mary Bolender of Las Vegas said her payment was three days past due when her car was disabled. She realized it when her 10-year-old daughter had a 103.5-degree fever and needed to go to the emergency room. Bolenders car has been disabled three other times this year but payment records show she was not behind on her payments in any of the four instances.
Perhaps the most extreme example is that of Candice Smith, who was driving on a Las Vegas freeway when she says her lender disabled her car. But CAG Acceptance, Smith's lender, says it's only possible to disable a vehicle by preventing it from starting, not by shutting it down while it's already running.
"I felt like even though I made my payments and was never late under my contract, these people could do whatever they wanted...and there was nothing I could do to stop them," Smith said.
(H/T: New York Times)
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