Lenders Monitor, Control Subprime Nexum Via Connected Vehicle Tech

In a perverse nexus where connected-vehicle technology, privacy and subprime lending intersect, consumers who fall behind on so much as a single payment, or even stray outside a given teritory, may find their vehicles shutdown by their lender from a digital panopticon.

The New York Times reports that some subprime borrowers — a group that made up a quarter of all new car loans in 2013 — must agree to have a GPS-equipped starter interrupt device installed in the vehicle of a given borrower’s choosing. In turn, the lender can keep track of where its property — and the borrower — is at all times, and with a single tap or click, cut all power to the vehicle if a borrower falls behind on payments.

However, some lenders are choosing to act only days after a missed payment — instead of the 30-day grace period before a borrower is considered in-default — no matter where exactly the vehicle is at the moment of shutdown. This has led to situations where a borrower has been stranded in a bad neighborhood, at the stop light, or, in one case, on the freeway.

Further, some loan agreements include so-called “geo-fences”: a maximum range a subprime borrower can travel before the lender, again, shuts down a vehicle and sends a tow truck to recover the asset. The claim is that a borrower who travels further than the fence allows — such as to their place of employment — may not be able to make good on their payments.

The consequences of using the devices have drawn considerable attention from both consumer lawyers and state regulators. The former argue starter interrupt systems give a lender all the more reason to remotely repossess a vehicle if even a payment is missed by a day, violating state laws on the matter as a result. The latter, in turn, is examining the potential safety hazards for the borrower and other motorists if the devices become defective.