Repossession Without the Repo Man: Starter Interrupt Devices
More than $145 billion in subprime auto loans were issued in the first three months of 2014. Subprime loans—which accounted for around 25% of all new auto loans in 2013—are those made to borrowers with credit scores of 640 or lower, typically at high interest rates, some exceeding 29%. Because involuntary repossession is costly to the lender who has a security interest in your vehicle and may leave lenders open to legal claims as a result of “breaching the peace” when they repossess, many subprime car lenders have started using a new device called a “starter interrupt device” to remotely “repossess” cars.
Starter interrupt devices, which are legal in North Carolina, are attached to a car usually at the time of purchase. When a lender believes a loan agreement default has occurred because the consumer missed a payment, failed to maintain insurance on the vehicle or had the car stolen, for example, the new technology allows the lender to remotely track and disable the vehicle by computer or smartphone. A car in which the device has been activated may fail to start, emit a loud alarm or both.
Although lenders claim that they use the devices only when borrowers default on a loan, a recent New York Times article described a repo man showing off an electronic map of nearly 900 borrowers’ cars and quoted a device manufacturer saying that he had lost business as a result of his company’s policy against activating the GPS tracking feature on its products before borrowers fall behind. The same article explained how another manufacturer provides its customers with analysis of borrowers’ movements prior to any missed payments by the borrower.
Privacy and consumer advocates have raised concerns about drivers stranded far from home, the safety of escapees from domestic violence, cars suddenly disabled in moving traffic, and conflicts with state laws and contractual provisions controlling repossession and when a default is deemed to have occurred. Many times, a lender may jump the gun and mistakenly repossess prior to default or after waiving its right to default by habitually accepting late and partial payments from the borrower.
The starter interrupt device is also subject to deliberate abuse. In 2010, for example, a vengeful ex-employee broke into an Austin, TX dealership’s web-based vehicle immobilization-system and activated the devices on more than 100 vehicles whose owners’ loans were not in default.
To determine when you are in default in North Carolina, you should always check your security agreement, which should describe the circumstances that constitute default. If the dealership or lender insists on attaching a starter interruption device before you can take out the car loan, shop around for another lender who won’t require it. Starter interruption devices almost always put a consumer at a disadvantage when it comes to car loans.