New Remote Kill Switches Make Repo Men Smarter -- And Deadlier

September 29, 2014

When last we spoke of repo (wo)men, we spoke of how they're using license plate readers to find folks who are late on loan repayments. (As if stalking people on Facebook weren't bad enough.)

But wait, it gets worse: according to the New York Times, if you're a subprime borrower -- generally speaking, anyone with a FICO score below 640 -- chances are pretty good that your not-yet-paid-off ride came equipped with a "starter interrupt device". If that sounds suspiciously like a kill switch, that's because it is.

SUBPRIME LOANS: A GROWING PROBLEM

The U.S. auto industry is booming right now. There are several reasons for that, including: pent-up demand following the great recession; the growing cost of gas, which encourages motorists to find more fuel-efficient rides; and a glut of new technology, from infotainment to hybrid powertrains, which make new cars especially attractive.

Of course, for the auto industry to prosper, consumers have to be able to secure car loans, and on the whole, they have in recent years. In fact, Americans currently owe more than $900 billion in auto loans -- an all-time high.

The good news is that, by and large, borrowers are repaying those loans on time. The bad news is, there are warning signs coming from the subprime side. It's not just that subprime loans now make up nearly one-third of outstanding auto loans. It's also the fact that consumers may be overextending themselves, since their salaries aren't keeping pace with car prices. (Well, that and the fact that some dealerships are taking things like shotguns as downpayments, which seems odd at best.)  

NEW TOOL FOR CREDITORS

Borrowers on the low end of the credit rating totem pole have always had to worry about supporting themselves and their families while meeting financial obligations. Recently, they've begun worrying about something else: that their cars will be suddenly disabled via starter interrupt devices.

The gadgets are now found on about 25 percent of cars purchased via subprime loans. In theory, they're only activated after lenders have failed to make contact with delinquent borrowers. In theory, they're also only designed to prevent a vehicle from starting, not disable it once the engine is on.

As great as that may sound (to repo men, anyway), there are a few concerns, some having to do with ethics, others with safety:

1. There aren't any laws to govern the disablement timeline. Some creditors and repossession companies insist that the devices are only used as a last resort, after 30 or more days of trying to reach a delinquent borrower have failed. Others don't appear to be as forthcoming. And in either case, there's no industry group to oversee the process and guarantee that companies practice what they preach.

2. On a similar note, there aren't any laws to govern when and how a vehicle is disabled. Repo companies say that they only use starter interrupt devices to prevent a vehicle from starting after it's been turned off. However, even adhering to that policy could strand consumers miles from home, a job, or a hospital. Furthermore, some people report their vehicles being disabled in traffic. Several say that their cars were turned off while they were idling at intersections, and at least one driver reports her car being disabled while she was driving in highway traffic in Las Vegas.

3. Last but not least, there are privacy concerns. Creditors and repo companies can use these disabling devices because of GPS. For borrowers, that means that any number of people may know where a car (and presumably, its driver) are at any given time. That became a real problem for a woman in Austin, Texas, who took her car to escape an abusive husband, but in doing so, violated the terms of her loan, which stipulated that she had to remain within a given area of town. Her car was disabled at a women's shelter, leaving her terrified that someone at the repo company might tip off her husband to her location.

To date, it doesn't appear that anyone has been injured or killed as a result of a vehicle disabling. But given the nature of this technology and the total lack of regulation governing its use, we wouldn't be surprised to hear about a related tragedy sometime in the near future.

If you have time, you can check out the full New York Times report here.

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