Miss a Payment? Good Luck Moving That Car


Consumer lawyers say the devices amount to “electronic repossession” of cars, and should be governed by state laws. Part of NYT's "Driven Into Debt" series on subprime auto loans. Article and 5-minute video.
News Story, Video (Arizona, California, Colorado, Louisiana, Missouri, Nevada)

Michael Corkery, Jessica Silver-Greenberg
New York Times (NYT)
September 24, 2014
Link to article

Tags: Consumer Protection, Technology


DETAILS

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.

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…. 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.

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.

DRIVEN INTO DEBT Articles in this series are examining the boom in subprime auto loans.