The thermometer showed a 103.5-degree fever, and her 10-year-old’s asthma was flaring up. Mary Bolender, who lives in Las Vegas, needed to get her daughter to an emergency room, but her 2005 Chrysler van would not start.
The cause was not a mechanical problem — it was her lender.
Ms. Bolender was three days behind on her monthly car payment. Her lender, C.A.G. Acceptance of Mesa, Ariz., remotely activated a device in her car’s dashboard that prevented her car from starting. Before she could get back on the road, she had to pay more than $389, money she did not have that morning in March.
“I felt absolutely helpless,” said Ms. Bolender, a single mother who stopped working to care for her daughter. It was not the only time this happened: Her car was shut down that March, once in April and again in June.
This new technology is bringing auto loans — and Wall Street’s version of Big Brother — into the lives of people with credit scores battered by the financial downturn.
Auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked in the last five years. The jump has been driven in large part by the demand among investors for securities backed by the loans, which offer high returns at a time of low interest rates. Roughly 25 percent of all new auto loans made last year were subprime, and the volume of subprime auto loans reached more than $145 billion in the first three months of this year.
But before they can drive off the lot, many subprime borrowers like Ms. Bolender must have their car outfitted with a so-called starter interrupt device, which allows lenders to remotely disable the ignition. Using the GPS technology on the devices, the lenders can also track the cars’ location and movements.
The devices, which have been installed in about two million vehicles, are helping feed the subprime boom by enabling more high-risk borrowers to get loans. But there is a big catch. By simply clicking a mouse or tapping a smartphone, lenders retain the ultimate control. Borrowers must stay current with their payments, or lose access to their vehicle.
“I have disabled a car while I was shopping at Walmart,” said Lionel M. Vead Jr., the head of collections at First Castle Federal Credit Union in Covington, La. Roughly 30 percent of customers with an auto loan at the credit union have starter interrupt devices.
Now used in about one-quarter of subprime auto loans nationwide, the devices are reshaping the dynamics of auto lending by making timely payments as vital to driving a car as gasoline.
Seizing on such technological advances, lenders are reaching deeper and deeper into the ranks of Americans on the financial margins, with interest rates on some of the loans exceeding 29 percent. Concerns raised by regulators and some rating firms about loose lending standards have disturbing echoes of the subprime-mortgage crisis.
As the ignition devices proliferate, so have complaints from troubled borrowers, many of whom are finding that credit comes at a steep price to their privacy and, at times, their dignity, according to interviews with state and federal regulators, borrowers and consumer lawyers.
Some borrowers say their cars were disabled when they were only a few days behind on their payments, leaving them stranded in dangerous neighborhoods. Others said their cars were shut down while idling at stoplights. Some described how they could not take their children to school or to doctor’s appointments. One woman in Nevada said her car was shut down while she was driving on the freeway.
Beyond the ability to disable a vehicle, the devices have tracking capabilities that allow lenders and others to know the movements of borrowers, a major concern for privacy advocates. And the warnings the devices emit — beeps that become more persistent as the due date for the loan payment approaches — are seen by some borrowers as more degrading than helpful.
“No middle-class person would ever be hounded for being a day late,” said Robert Swearingen, a lawyer with Legal Services of Eastern Missouri, in St. Louis. “But for poor people, there is a debt collector right there in the car with them.”
Lenders and manufacturers of the technology say borrowers consent to having these devices installed in their cars. And without them, they say, millions of Americans might not qualify for a car loan at all.
A Virtual Repo Man
From his office outside New Orleans, Mr. Vead can monitor the movements of about 880 subprime borrowers on a computerized map that shows the location of their cars with a red marker. Mr. Vead can spot drivers who have fallen behind on their payments and remotely disable their vehicles on his computer or mobile phone.
The devices are reshaping how people like Mr. Vead collect on debts. He can quickly locate the collateral without relying on a repo man to hunt down delinquent borrowers.
Gone are the days when Mr. Vead, a debt collector for nearly 20 years, had to hire someone to scour neighborhoods for cars belonging to delinquent borrowers. Sometimes locating one could take years. Now, within minutes of a car’s ignition being disabled, Mr. Vead said, the borrower calls him offering to pay.
“It gets their attention,” he said.
Mr. Vead, who has a coffee cup that reads “The GPS Man,” has been encouraging other credit unions to use the technology. And the devices — one version was first used to help pet owners keep track of their animals — are catching on with a range of subprime auto lenders, including companies backed by private equity firms and credit unions.
Mr. Vead says that first, he tries reaching a delinquent borrower on the phone or in person. Then, only after at least 30 days of missed payments, he typically shuts down cars when they are parked at the borrower’s house or workplace. If there is an emergency, he says, he will turn a car back on.
None of the borrowers or consumer lawyers interviewed by The New York Times raised concerns about the way Mr. Vead’s credit union uses the devices. But other lenders, they said, were not as considerate, marooning drivers in far-flung places and often giving no advance notice of a shut-off. Lenders say that they exercise caution when disabling vehicles and that the devices enable them to extend more credit.
Without the use of such devices, said John Pena, general manager of C.A.G. Acceptance, “we would be unable to extend loans because of the high-risk nature of the loans.”
The growth in the subprime market has been good for the devices’ manufacturers. At Lender Systems of Temecula, Calif., which sells a range of starter interrupt devices, revenue has more than doubled so far this year, buoyed by an influx of new credit union customers, said David Sailors, the company’s executive vice president.
Mr. Sailors noted that GPS tracking on his company’s devices could be turned on only when borrowers were in default — a policy, he said, that has cost it business.
The devices, manufacturers say, are selling well because they are proving effective in coaxing payments from even the most troubled borrowers.
A leading device maker, PassTime of Littleton, Colo., says its technology has reduced late payments to roughly 7 percent from nearly 29 percent. Spireon, which offers a GPS device called the Talon, has a tool on its website where lenders can calculate their return on capital.
Fears of Surveillance
While the devices make life easier for lenders, their ability to track drivers’ movements has struck a nerve with a number of borrowers and some government authorities, who say they are a particularly troubling example of personal-data gathering and surveillance.
At its extreme, consumer lawyers say, such surveillance can compromise borrowers’ safety. In Austin, Tex., a large subprime lender used a device to track down and repossess the car of a woman who had fled to a shelter to escape her abusive husband, said her lawyer, Amy Clark Kleinpeter.
The move to the shelter violated a clause in her auto loan contract that restricted her from driving outside a four-county radius, and that prompted the lender to send a tow truck to take back the vehicle. If the lender could so easily locate the client, Ms. Kleinpeter said, what was stopping her husband?
“She was terrified her husband would be able to find out where she was from the tow truck company,” said Ms. Kleinpeter, a consumer lawyer in Austin, who said a growing number of her clients had the devices installed in their cars.
Lenders and manufacturers emphasize that they have strict guidelines in place to protect drivers’ information. The GPS devices, they say, are predominantly intended to help lenders and car dealerships locate a car if they need to repossess it, not to put borrowers under surveillance.
Spireon says it can help lenders identify signs of trouble by analyzing data on a borrower’s behavior. Lenders using Spireon’s software can create “geo-fences” that alert them if borrowers are no longer traveling to their regular place of employment — a development that could affect a person’s ability to repay the loan.
A Spireon spokeswoman said the company takes privacy seriously and works to ensure that it complies with all state regulations.
Corinne Kirkendall, vice president for compliance and public relations for PassTime, which has sold 1.5 million devices worldwide, says the company also calls lenders “if we see an excessive use” of the tracking device.
Even though the device made her squeamish, Michelle Fahy of Jacksonville, Fla., agreed to have one installed in her 2001 Dodge Ram because she needed the pickup truck for her job delivering pizza.
Shortly after picking up her four children from school one afternoon in January, Ms. Fahy, 42, said she pulled into a gas station to fill up. But when she tried to restart the truck, she was not able to do so.
Then she looked at her cellphone and noticed a string of missed calls from her lender. She called back and asked, “Did you just shut down my truck?” and the response was “Yes, I did.”
To get her truck restarted, Ms. Fahy had to agree to pay the $255.99 she owed. As she pleaded for more time, her children grew confused and worried. “They were in panic mode,” she said. Finally, she said she would pay, and within minutes she was able to start her engine.
Borrowers are typically provided with codes that are supposed to restart the vehicle for 24 hours in case of an emergency. But some drivers say the codes fail. Others say they are given only one code a month, even though their cars are shut down more often.
Some drivers take matters into their own hands. Homemade videos on the Internet teach borrowers how to disable their devices, and Spireon has started selling lenders a fake GPS device called the Decoy, which is meant to trick borrowers into thinking they have removed the actual tracking system, which is installed along with the Decoy.
Oscar Fabela Jr., who said his 2007 Dodge Magnum was routinely shut down even when he was current on his $362 monthly car payment, discovered a way to circumvent the system.
That trick came in handy when he returned from seeing a movie with a date, only to find his car would not start and the payment reminder was screaming like a burglar alarm.
“It sounded like I was breaking into my own car,” said Mr. Fabela, 26, who works at a phone company in San Antonio.
While his date turned the ignition switch, Mr. Fabela used a screwdriver to rig the starter, allowing him to bypass the starter interruption device.
Mr. Fabela’s car eventually started, but it was their only date.
“It didn’t end well,” he said.
Government Scrutiny
Across the country, state and federal authorities are grappling with how to regulate the new technology.
Consumer lawyers, including dozens whose clients’ cars have been shut down, argue that the devices amount to “electronic repossession” and their use should be governed by state laws, which outline how much time borrowers have before their cars can be seized.
State laws governing repossession typically prevent lenders from seizing cars until the borrowers are in default, which often means that they have not made their payments for at least 30 days.
The devices, lawyers for borrowers argue, violate those laws because they may effectively repossess the car only days after a missed payment. Payment records show that Ms. Bolender, the Las Vegas mother with the sick daughter, was not in default in any of the four instances her ignition was disabled this year.
PassTime and the other manufacturers say they ensure that their devices comply with state laws. C.A.G. declined to comment on Ms. Bolender’s experiences.
State regulators are also examining whether a defective device could endanger the borrowers or other drivers on the road, according to people with knowledge of the matter who spoke on the condition of anonymity.
Last year, Nevada’s Legislature heard testimony from T. Candice Smith, 31, who said she thought she was going to die when her car suddenly shut down, sending her careening across a three-lane Las Vegas highway.
“It was horrifying,” she recalled.
Ms. Smith said that her lender, C.A.G. Acceptance, had remotely activated her ignition interruption device.
“It’s a safety hazard for the driver and for all others on the road,” said her lawyer, Sophia A. Medina, with the Legal Aid Center of Southern Nevada.
Mr. Pena of C.A.G. Acceptance said, “It is impossible to cause a vehicle to shut off while it is operating,” He added, “We take extra precautions to try and work with and be professional with our customers.” While PassTime, the device’s maker, declined to comment on Ms. Smith’s case, the company emphasized that its products were designed to prevent a car from starting, not to shut it down while it was in operation.
“PassTime has no recognition of our devices shutting off a customer while driving,” Ms. Kirkendall of PassTime said.
In her testimony, Ms. Smith, who reached a confidential settlement with C.A.G., said the device made her feel helpless.
“I felt like even though I made my payments and was never late under my contract, these people could do whatever they wanted,” she testified, “and there was nothing I could do to stop them.”
I did not know this was a thing. And it is terrifying. But assuming it is completely legal, people know about it in advance and agree to it, etc., I think 3 days late is crazy aggressive. People with the most exceptional credit/payment history make mistakes, checks get lost in the mail (for real), payments get processed incorrectly...all the time. Now at the 45-60 day window? Maybe.
Sigh. We just keep kicking poor folks while they are down and then getting mad about why they can't get up despite our foot on their necks.
yup. Because lord knows the best way to get your money from somebody is to make sure they can't drive their car to work.
Side note - I witnessed a car getting repo'd the other day and it was WEIRD. I grew up in the boonies, so even though I'm sure a few of my neighbors were losing cars (well, trucks really) to the repo man it wasn't something you would see since we were all in the woods. I was in a suburban townhouse community and the tow truck had my car blocked in so I had to just stand there and watch the whole thing while I was trying to leave. The driver literally had his truck backed in and the car hooked up before I even realized what was happening. SO FAST. And then he went and knocked on the door, showed them some paperwork, popped the lock on the car, put it in neutral and off he went.
I was curious what the legalities of all that are - like, could the person have taken their stuff out of the car if they were so inclined? Would that have legal consequences when they try to get their car back? What if they had JUST paid the bill? How does all this actually work? It seems like a really fucking shady system.
This also seems like a safety issue. For example, I love to camp in the wilderness. What if my payment got lost in the mail and I ended up stuck out there with no car, no cell service, etc.?
At least use a more reasonable timeline (45-60 days) so that if there is some error along the line the person has a chance to sort it out.
Post by Velar Fricative on Sept 25, 2014 9:23:33 GMT -5
This cannot (should not) be legal. Not to mention, it sounds fucking dangerous. And I smell invasion of privacy too but not 100% sure of the legality of privacy here.
Post by penguingrrl on Sept 25, 2014 9:36:17 GMT -5
First off, this is insane. And 3 days late? I've definitely mistakenly paid bills 3 days late before. Plus, that just sounds dangerous, especially for people who were driving when it was shut off. Are they waiting for someone to die as a result of this before acting?
And cutting off someone's access to work doesn't seem like the best option for getting payment out of them. I mean, just a hunch, but if someone is having financial issues leaving them unable to work seems particularly mean spirited and a way to keep the poor poor.
First off, this is insane. And 3 days late? I've definitely mistakenly paid bills 3 days late before. Plus, that just sounds dangerous, especially for people who were driving when it was shut off. Are they waiting for someone to die as a result of this before acting?
And cutting off someone's access to work doesn't seem like the best option for getting payment out of them. I mean, just a hunch, but if someone is having financial issues leaving them unable to work seems particularly mean spirited and a way to keep the poor poor.
the shut off while driving things sounds odd. Unless this is not actually a normal ignition disruptor and they're just calling it that - it shouldn't be able to turn off your car once it's running. They aren't blowing smoke there - it physically shouldn't' be able to do that unless it's installed wrong or something.
I also want to know more about the borrower who had a loan condition limiting her to driving in just four counties. What the ever loving fuck kind of provision is that?
First off, this is insane. And 3 days late? I've definitely mistakenly paid bills 3 days late before. Plus, that just sounds dangerous, especially for people who were driving when it was shut off. Are they waiting for someone to die as a result of this before acting?
And cutting off someone's access to work doesn't seem like the best option for getting payment out of them. I mean, just a hunch, but if someone is having financial issues leaving them unable to work seems particularly mean spirited and a way to keep the poor poor.
the shut off while driving things sounds odd. Unless this is not actually a normal ignition disruptor and they're just calling it that - it shouldn't be able to turn off your car once it's running. They aren't blowing smoke there - it physically shouldn't' be able to do that unless it's installed wrong or something.
I was thinking that too, but there appeared to be multiple claims of it shutting off while the car was on (stop lights, the one that claimed it happened while on the freeway). Even if that's either a malfunction or an improper install, if that's possible at all then the devices shouldn't be allowed. Because that presents a very serious safety issue. Even beyond the fact that this is absolutely heinous.
There's a few local dealers that provide financing that have this ability. Basically if you can't get financing normal ways, they'll set it up for you but probably not in the best of terms; you go there if you're desperate (what else is new for the poors). I don't know what their late policy/time line is for this. And I have never heard of it happening with the car moving. But 3 days does seem incredibly restrictive.
Post by LoveTrains on Sept 25, 2014 10:05:12 GMT -5
This is horrifying. I agree that three days late is insane. I accidentally paid my credit card 2 days late last month because it's one I don't use any more but my cable is automatically charged to it and I just forgot. I only realized my mistake when I got an email from mint telling me I was charged a late fee.
They're calling it a starter-interrupter, so that seems like an exaggeration. The one about the car being cut off while on the highway seems more like an outright lie.
I was just googling around and found this old industry article about the use of these things...this is interesting. Apparently this use has been around for a while.
The devices first came to the attention of most of us in the late '90s when consumers sued a Detroit-area dealer, claiming that the devices stopped their cars while they were running. The suit was quickly settled. Fewer than 10 reported suits have been filed since, most of which dealt with the “automatic stay” provisions of the U.S. Bankruptcy Code.
There have been no reported cases dealing with whether the devices are legal under state law ("reported cases" are federal trial court cases, some state trial court cases, and appellate cases resulting in published opinions). Nor has there been much significant legislative or regulatory activity concerning the devices.
Does the fact that most states have been silent concerning the devices mean that there’s now a "green light" for their use as far as their legality goes? Hardly. Some state authorities really dislike the devices and have issued letters saying they are illegal to use in their states. Other state authorities have determined that dealers can use the devices legally if certain safeguards are met. Consumer advocates, however, denounce the use of the devices, darkly hinting that they may be used in dangerous, illegal or discriminatory ways.
With all that in mind, consider the following "dos" and "don’ts" for the use of starter interrupt devices:
Do determine what your state consumer protection authorities and/or your state attorney general have to say before you use a device.
Dobe sure the manufacturer has done its legal homework. Some companies are far up the curve on legal issues while others are just beginning to grapple with them.
Do alert your insurance carrier that you intend to use the devices and get its confirmation in writing that risks arising from the use of the devices are covered by your policy.
Do have your personnel properly trained or use qualified third party to install the devices.
Do have the use of the devices and all related paperwork reviewed by your lawyer. Have him or her check that the use of the devices complies with state and federal law.
Do consider using an arbitration agreement in connection with your financed sales and leases. It will go a long way toward keeping you out of class actions and reduce your exposure to runaway jury verdicts.
Do educate your state legislators, consumer protection authorities and dealers association on how the devices work and how they benefit you and your customers. Tell the authorities that you want to be alerted if any relevant regulations or legislation is introduced.
Don't try to pass the cost of the device along to your customers or try to market it as an anti-theft system.
Do disclose to the customer that the device is on the vehicle, its exact purpose, emergency procedures and anything else your lawyer tells you to disclose. Be wary of other legal snags as well. For example, courts in some states have held that car dealers who find financing for their customers or offer to help them improve their credit ratings fall within so-called “credit repair” statutes, triggering disclosure, licensing and other requirements.
Don't discriminate in requiring the devices in a manner that violates federal or state anti-discrimination laws. Be alert to the possibility that at least under the federal Equal Credit Opportunity Act, discrimination on a "neutral" basis — such as credit scores —can violate the ECOA if such discrimination has the "effect" of discriminating on a protected basis.
If starter interrupt devices are used with care and in connection with finance and lease programs that are fair in every sense, they may well become more widely accepted. However, if operators use the devices in ways that are overreaching or are perceived to be overreaching, look for courts and regulatory authorities to seek to curb or prohibit their use.
This might have something to do with it: It was not the only time this happened: Her car was shut down that March, once in April and again in June.
How would you feel if it was your paycheck that was being paid late that often ?
Am I getting paid exorbitantly more per pay period b/c I took the job with the knowledge that my boss had a history of paying a little late each month but he eventually comes through?
Post by schrodinger on Sept 25, 2014 12:57:24 GMT -5
As a concept, I don't really have an issue with the device. BUT, I think that there should be a process similar to eviction that both sides have to follow before the car is shut off. Certified letters as documentation, payment plan options, clear time tables, etc. so that both sides know where they are in the shut-off process. Three days late on a payment is ridiculous. A process that starts at 30 days late and escalates to shut off at 60 or 90 would seem more reasonable.