By on September 26, 2014

Isis Panopticon Album Cover

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.

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53 Comments on “Lenders Monitor, Control Subprime Nexum Via Connected Vehicle Tech...”


  • avatar
    schmitt trigger

    “The latter, in turn, is examining the potential safety hazards for the borrower and other motorists if the devices become defective.”

    Indeed!
    It would be very bad news to be shutoff in an LA freeway or the tunnels leading into Manhattan during rush hour…heck, at any time.

    • 0 avatar
      Rick T.

      I listened to a radio show where people who had worked installing these systems discussed this article. Basically they cannot shut off a moving car. It will only prevent a car from starting again after the system has been activated.

  • avatar
    omer333

    I never thought I’d see an ISIS album used by TTAC.

    Back to the article, I understand wanting to keep track of the vehicle, but once a couple people die as the result of these killswitches (regardless of social-economic standing), the hammer will fall pretty hard.

    I think.

  • avatar
    Master Baiter

    Seems easy enough to schedule the shut down at 3 a.m. when it wouldn’t cause the issues mentioned.

  • avatar
    28-Cars-Later

    Great article Cameron. I heard about this technology ten years ago when I first entered the used car business but it was only talk/rumor at the time. Based on my reelection, the technology was expensive and was not worth using in the prevalent $3-6K retail cars at the time (which were $1-3K valued cars in reality).

  • avatar
    Jeff Weimer

    I find the whole idea alarming, but it would make repos a lot easier. What does Steve think? Does he post here anymore?

    There should be some notification before disabling the vehicle. Perhaps a notification played over the car’s speakers, interrupting the radio or playing even when the radio is turned off. Give the driver a set amount of time to safely stop the car if necessary. Continue playing the notification at set intervals in case the driver was out of the car for the initial notification.

    I can foresee leased cars having this and the car gets disabled if it reaches a set number over the agreed upon yearly mileage. Or rentals set at so many miles per day.

    • 0 avatar

      Usually a series of beeps and noises like a dying cell phone battery alerts you that a shutdown is impending. This, of course, comes after the multiple phone calls to your cell, home, and work phones have been sent to ignored for days on end.

    • 0 avatar
      28-Cars-Later

      Jeff I share you concern from a free citizen’s and IT person’s perspective and yet I can see the dealer side of things. I would be interested in learning more about the technology so I could determine how to sabotage or disable it for my own purposes.

    • 0 avatar
      danio3834

      Flybrian is our new Steve.

    • 0 avatar
      PandaBear

      To be honest, it is no difference than sending the repo man out earlier than expected, like sending him out before you’re late and at the exact hour of missed payment, just take the car away.

      The difference is how the technology is used, just like how business is conducted.

  • avatar
    thegamper

    The whole thing seems rather humiliating from the borrowers perspective to have to jump through so many hoops that the good credit population is spared from. My first reaction is that if it were me, I would take the bus rather than subject myself to this level of heavy handedness by the lender. I realize though that that is not always an option for people in these circumstances. It is all rather sad actually that those with the least available resources will be forced to pay substantially more for subpar products and services thus ensuring the cycle of poverty.

    The obvious question this all raises, if such extreme measures are necessary to secure the asset, perhaps such a loan should not be made in the first plance. The lenders would argue they are providing a necessary service. I would tend to call all of this preditory lending.

    • 0 avatar
      28-Cars-Later

      “The obvious question this all raises, if such extreme measures are necessary to secure the asset, perhaps such a loan should not be made in the first plance.”

      Exactly but subprime is so profitable due to exorbitant interest rates the practice will continue even when a healthy percentage defaults or otherwise destroys the vehicle. This technology simply helps to cut down on default/thefts and thus increases profitability.

    • 0 avatar
      ant

      “It is all rather sad actually that those with the least available resources will be forced to pay substantially more for subpar products and services thus ensuring the cycle of poverty.”

      I agree.

      Payday lenders and outfits like this are certainly not helping anybody in the long run. They make communities bleed.

      So if the profits are so obscenely high, why doesn’t somebody come in and open a business that undercuts all these ripoff outfits?

      What is the competition like for buy-here-pay-here car dealerships?

      Payday lending at half price! (only 500% APR)

      • 0 avatar
        kmoney

        I’d be interested in seeing that too. The fact that there isn’t much undercutting (assuming there isn’t some informal price fixing among the industry) almost makes me wonder if the costs of default, collection, etc… mean the interest rates charged are actually somewhat in alignment with the market price of risk.

  • avatar

    Lenders resort to this to minimize their losses based the track record of the consumer being a habitual loser when it comes to repaying debt.

    I will say starter interrupts only beget worse behavior. The reason is simple – people who have use of their car disabled more often than not take out their frustration on the vehicle (the collateral) itself, meaning that when you DO find and recover the car, its scratched from front to back with the stereo removed, tires slashed, glass broken, and anything of value stolen to possibly be sold or even just out of spite. This makes the car effectively worthless, especially if its a late-model otherwise remarketable vehicle.

    Would you – as a lender – rather spend a few more days chasing down a delinquent loan to recover the collateral or stop it in its tracks NOW but risk it being terminally destroyed?

    For what its worth, the subprime lenders I use (Westlake, UACC, Nicholas, Sterling, some local outfits) don’t require GPSs and those that do only want it to track and recover. Credit Acceptance Corp uses interrupts on the majority of their loans, but their whole business model is shady and only benefits one entity – CAC – even at the expense of their dealers. But that’s another story…

    Also, starter interrupts are just that – they prevent the vehicle from restarting until a code is entered or an unlocking signal is pinged. They don’t shut the vehicle down while its in motion. If someone has problems, well, that’s an installation issue.

    I find it very interesting that the New York times picked up on this because the whole concept behind the starter interrupt ‘payment assurance device’ is part and parcel of a completely different world they aren’t familiar with. There’s a whole world out there comprised of people putting down payments on cars they know they can’t afford, burning a dealer or lender, then going up the street to do it again to the next sucker willing to put them in car. Its hardly ever the 9-5er trying to make ends meet; its the ne’r-do-well who insists on a car they know they can’t afford knowing they won’t make the payments more than six months anyway.

    • 0 avatar
      golden2husky

      ….Its hardly ever the 9-5er trying to make ends meet; its the ne’r-do-well who insists on a car they know they can’t afford knowing they won’t make the payments more than six months anyway…

      Any links on that? This is just another example of corporations invading into areas they shouldn’t go. America’s hard earned rights are evaporating in the hands of the moneyed and there is barely a whimper from the sheeple…..

      • 0 avatar
        28-Cars-Later

        I used to work in the business, the BHPH cars we lost (seriously never saw again) or had repo’d were invariably sh**bags of one form or another and this was in 2004-6 prior to the current depression. Plenty of honest but poor folks made their payments, and those folks usually bought relatively cheap domestic cars and trucks. My two cents on the subject, although I agree needed or not lo-jacking the cars is shades of a Brave New World.

  • avatar
    mkirk

    I know this has been around for at least 5 years now. I had a couple of my Soldiers that had purchased cars at the local “We finance E1 and up!” places outside of the gate with these. It was never while driving down the road though…just kept it from restarting. You’d see the cars left in the parking lot at the company for a week or so every now and then generally to be removed on payday.

    • 0 avatar
      TMA1

      Ah, the pleasures of living in a military town. That’s why I rarely went beyond the gate of Camp Lejeune. Getting stationed at Quantico was a godsend, comparatively speaking.

  • avatar
    superchan7

    I spent a few minutes to think about this. I don’t really have a problem with it. Let the market judge this device–maybe it’ll work great and good-credit buyers would just shun any contract with this kind of requirement in it. The lenders would quickly figure out which buyers (borrowers) really need these devices.

    Maybe as Flybrian noted, subprime lenders would damage their imminent repos out of spite. The lenders would quickly figure out their risks here.

    Maybe a reliability or safety issue exposé on an investigative show would make it all a moot point.

    • 0 avatar
      stuki

      “The market” stopped functioning, when interest rates and credit availability was divorced from the availability of savings. Hence driving prices on things that could be bought on credit up to where those deemed “not credit worthy” have a much harder time affording it.

      Accurate risk allocation is distorted when lenders can disable/(destroy the functionality of) the product the buyer bought with little to no risk of state involvement, but if the guy who has his car disabled decides to further add to it’s disablement, he is suddenly dragged in front of a criminal judge. And on my, some random taxpayers, dime, even.

      Pretending that removing people’s ability to live as they otherwise could; by cooking up a scheme where credit displaces earnings and savings as the pathway to purchasing power, thus forcing an unnatural number of people into more debt than they would otherwise take on; then use the existence of that debt to put restrictions of debtors freedom; is in practice no different at all than simply assigning some people to slavery directly by legislation. The former way is simply an obfuscation, sufficiently confusing to the public school indoctrinated to serve the same purpose as the latter.

      • 0 avatar
        Rick T.

        Why don’t you put together a fund and lend these “not credit worthy” people car loans at low rates?

        Do you think it shouldn’t be against the law to destroy property on which a lender has a lien? Should I be able to burn down the house I live in without consequences if the bank is going to repossess it?

        • 0 avatar
          stuki

          Extending credit to non credit worthy people doesn’t exactly strike me as the most brilliant way to spend ones money…….

          Non credit worthy does not, however, mean non productive. Nor is credit worthy person A necessarily more productive than non credit worthy person B. Yet, the greater the availability of credit to A, the more difficult it is for B to successfully bid for and obtain economic resources. In this specific case, it often means B cannot afford a car, despite producing enough value that he would be able to were it not for artificially easy credit extended to A. Meaning A is deprived of a car by policy. Obfuscated policy, but policy nonetheless.

          In general, possession is no longer presumed to be nearly as much of the law, as it once was, and ought to be. If you don’t want people to mess up your car; make sure they can’t get hold of it. Law enforcement is not cost free. Someone pays, almost always third parties. If you expect me to pay taxes to help protect your property, you should at least have the decency to minimize my exposure, by not treating people you hand your property to in a manner so shitty they take it out on your stuff. Or, if you do wish to treat them like shit, you’re on your own..

      • 0 avatar
        superchan7

        @stuki

        You are describing a systematic problem with the US economy, which is something for the US Government to resolve. A lender installing a device on its property, so far, does not violate the borrower because the borrower does not legally own the car.

        Yes, our free market has been manipulated into a hollowing-out of the middle class. But that is not ABC Auto Loan’s problem.

        • 0 avatar
          stuki

          It’s most certainly not ABC auto loan’s problem. More like their customers’…

          But it’s also a system sufficiently immoral to it’s rotten core, to render any beneficiary’s claims about moral wrongdoing by it’s victims when they burn the whole thing to the ground, ring rather hollow. As in, again, why should I pay taxes to hire a bunch of government goons to harass some dude for destroying his car, which no longer serves any purpose for him in the first place?

  • avatar
    vent-L-8

    The NYT article was a bit misleading. They recalled a woman’s claim that her car was disabled while she was on the highway in Las Vegas. The company reposonsible for the devise says that it doesn’t “shut off” a running motor but rather keep it from starting.

    There were also sob stories of not being able to get to the hospital in an emergency etc…

    The underlying feeling the NYT was pushing seems to be that car ownership is somehow now a basic human right and should not be infringed upon. Kind of like how people in Detroit should not have their water service turned off just because they no longer pay their utility bill.

    The most disturbing part of the article was where they reposted (as has been stated here) that over 1/4 of new car loans are subprime.

    Is there abuse in monitoring where people go? Probably, we should look at when companies may access this data (only in the cases of non payment) but when you are a high risk credit lenders will need some kind of assurance.

    Lastly, since people with these devices are more likely to keep paying their car notes (I assume), do they get a break on the gawd awful rates they pay? Methinks they should.

    • 0 avatar
      PandaBear

      Exactly. How is that different from their cars gotten repo because they didn’t make the payment? Anyone suing the repo men because they can’t get to the hospital or they couldn’t go to work afterward?

    • 0 avatar
      TMA1

      “There were also sob stories of not being able to get to the hospital in an emergency etc…”

      And in case of emergency, some of the devices have a one-time override code that the person can use to start the car.

  • avatar
    doublechili

    The borrower/drivers in this case voluntarily give up some control of their vehicles in exchange for the benefits of a subprime loan and therefore car ownership. So we find the result of that loss of control newsworthy because it’s novel that someone else can control our car.

    The interesting part of this story to me is that it’s a preview of the kinds of things we’d see in a world with “autonomous” cars, where we give up some control of our vehicles in exchange for (insert whatever benefit you want here, or none as in my case). Everyone would be in the position where someone else could control their car. Sometimes that would be good, other times maybe not so much.

  • avatar
    Conslaw

    As a consumer lawyer, I remember going to a conference about 20 years ago where I learned about starter cut-off technology which was being pioneered by dealerships owned by Ex-NFL player Mel Farr. In the consumer law community we thought this was going to be a large scale tragedy in the making. Over the last years, I’ve done more than 50,000 intakes on consumer problems and I’ve never had a caller call with a problem about an electronically disabled car. I’ve had people call and say they were amazed that the repo man found their car: something I attribute to GPS transponders hidden in the car. Anecdotally, I’ve been told that the cut-off devices are only set to keep the car from being restarted from a stop; thereby avoiding situations where it stops while being driven down the road. I’ve also been told that immediate payments over the phone are usually the result of the cut off, and afterwards the car is turned back on again. If handled right then, if the cut-off avoids the expense of an actual repossession, it’s not all bad. Of course, the technology can be abused, just like any other.

  • avatar
    JohnnyFirebird

    Yikes. Paying extra for the privilege of having your car remotely deactivated. As someone who has been late on a few car payments over my lifetime this is pretty terrifying.

    • 0 avatar

      To ‘qualify’ for this type of wrist-slap means that you have likely had multiple auto-related reposessions.

      In the eyes of a finance company, they know no one pays medical bills in this country, nor do people pay student loans. Sometimes, their house goes underwater, and they may get evicted from their apartment. Bankruptcies occur, tax liens, judgements, etc. But what happens when all that proveribal #2 hits the fan? You pack your crap into…your car. You live temporarily out of…your car. You drive back to mom and dad in…your car. Your car is the one thing you will always try to pay. And if you haven’t proven otherwise, you’ll get some ‘credit’ for that in the form of not having a starter-interrupt as stipulation for your financing.

      • 0 avatar
        siuol11.2

        That’s funny, it only took 1 repo from over 5 years ago for me to have one as part of my loan contract. Reduced system costs and complexity likely means more lenders are using them in more “just in case” scenarios.

  • avatar
    87 Morgan

    Another non issue. The folks who have starter interrupt systems installed in there cars know exactly why. They are not newbies to credit and not paying. There are a multitude of banks who will loan you $$ in a car if you have had one repo, bk, FC that do not require a tracking device.

    If you, as a consumer need one installed to qualify for a loan, you most like know the repo guy by name. You reap what you sew.

    • 0 avatar
      highdesertcat

      Exactly!

      I watched the segment on this topic on Bloomberg yesterday and the lady said these devices are only installed on used cars in the $5K – $20K range and not on new cars. So it is really aimed at lower income people who struggle from paycheck to paycheck.

      It was an interesting segment and I agree with the premise that if you don’t make the payment, you lose the ride, regardless of reason.

      People who lend money are in business to make money, not lose it.

  • avatar
    PandaBear

    I’m sure anyone with a brain will agree that it is suppose to prevent start after the engine cool down instead of suddenly cut fuel in the middle of the freeway. Lender wouldn’t want to cause highway accidents and get sued more than the car is worth.

    What if you get stranded in a bad neighborhood? A lot of the borrower are from the bad neighborhood.

    To be honest, I see this as a good way to reduce risk and reduce rates for people that may be tempted to do something bad. If you cannot afford the car, it is usually wise to return it or renegotiate instead of running away from the repo man.

    Geo fence being bad? If they let you go to work, home, and groceries store so you can make your payment, I’d say it is a good alternative of repo.

    Now if they threaten to expose to the world where you have been in the last 30 days? I’d say that’s totally wrong. My main concern is software bugs that cause no start or people simply taking the whole system out and put the system on a decoy instead.

  • avatar
    anti121hero

    You probably pulled this picture by Google imaging isis but this is an incredible album by an awesome band. Heavy sludgy stuff.

    • 0 avatar

      “Isis panopticon,” to be exact. Also: “Celestial (The Tower)” is my second-favorite Isis track.

      Did I mention I was really into metal while in high school and through college? Sepultura, Slayer, Carcass, Tiamat, Samael, Amorphis, Anthrax… yes.

      • 0 avatar
        petezeiss

        Was Isis metal? Knew nothing so briefly listened to a little live stuff on YT and only heard some insufferably long intros (I guess) with mid-tempo, jangly strumming ala U2.

        In their favor, I didn’t hear a single word sung.

        • 0 avatar

          They very much were. Some of their songs built-up toward a crushing crescendo over a few minutes, others (like “Celestial”) just threw you in.

          As for the vocals, they weren’t meant to be heard clearly; they were part of the music as far as the band was concerned.

          • 0 avatar
            petezeiss

            I actually meant there *were* no vocals for the duration of my endurance.

            But as a rabid fan of Stars of the Lid, I see that as a plus.

  • avatar
    3Deuce27

    Pay Cash!

    Financing any vehicle is very expensive unless it can be used as a business deduction/writeoff. On a new and newer vehicle, financing and depreciation are a double negative inflating the cost of vehicle ownership. Throwing away hard earned cash at inflated costs for new or shiner paint, is just stupid.

    Take a few paychecks and buy a beater and drive it until you can save up for a better vehicle, and then use the saved money to buy a house and keep driving the beater. Your ego and sense of self-worth won’t allow that… grow up or consign yourself to financial purgatory.

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