Lenders Implement Technology To Encourage Timely Payments

September 29, 2014 | Comments Off on Lenders Implement Technology To Encourage Timely Payments
Posted by Donald F. Campbell, Jr.

A new trend has developed in the subprime auto lender industry, involving lenders installing devices that can remotely disable the ignition of their vehicles at any time. Subprime borrowers are considered those with credit scores of 640 or below. A drastic increase in subprime borrowers can be attributed to the recent financial downturn. Over the last year approximately 25 percent of new auto loans were considered subprime.

Most subprime borrowers cannot drive the car off the lot without having a “starter interrupt device” installed in the vehicle. These devices possess GPS capabilities, allowing lenders to see where the vehicles are at all times as well as shut down the car from their phones or computers and prevent it from being restarted. Lenders are using these devices as a tool to penalize borrowers who are behind on their payments and encourage them to pay their loans.

Borrowers have reported having their cars shut down in emergency situations, while idling at traffic lights, in dangerous neighborhoods or situations. Oftentimes there are monthly codes given to borrowers to turn the car on for 24 hours in emergency situations, but many have reported the codes do not work or their vehicles are shut down multiple times in one month. It is not yet known if the devices could cause harm to the borrower or other drivers on the road if it were defective.

Another downside to these devices comes in the form of an invasion of privacy for borrowers. Some government agencies view this as a breach of privacy as well as a method of surveillance and personal data-gathering.  Consumer lawyers across the country argue that lenders are breaking laws that state a borrower must be in default, 30 days behind on a payment, before repossession can occur. Lenders will likely experience legal issues due to this new technology.

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