Remote GPS Starter Kill: The New Norm For Subprime Loans?

It’s getting harder and harder to hide from creditors, especially if they are tracking your every move. While this may sound like a scene from the film “Minority Report,” it’s a new reality for auto lenders. An increasing number of borrowers are seeing their vehicles come complete with a GPS tracker and starter kill. More precisely, it’s a remote starter kill.

Auto lenders are finding it necessary to remotely shut off vehicles if borrowers fall behind on their payments. Lionel M. Vead Jr., the head of collections at First Castle Credit Union told the NYT that remotely disabling vehicles works. “It gets their attention,” Vead said. While it may grab their attention, it has caused a bit a controversy. The devices will disable a vehicle and sometimes send out a loud streak of beeps to tell the borrower that the vehicle is either delinquent on a payment, or perhaps more annoying, that a payment is coming due. An estimated two million of these devices have been installed in vehicles across the nation.

A Las Vegas mother reported that her vehicle was disabled via GPS device and she wasn’t able to take her sick child to the emergency room. Another family reported being stranded at a gas station on the way to school one morning. A young man explained that he went to the movies on a date and came out only to find his car remotely disabled and a loud beep coming from his dashboard. He said it looked and sounded like he was breaking into his own car. The worst however, was the report of a Nevada woman who said that her vehicle was remotely disabled while she drove it on the freeway, causing her to careen through three lanes of traffic and narrowly avoid an accident. She has since settled a lawsuit against the maker of the device. According to reports, some lenders won’t disable a vehicle unless the borrower is 30 days late on a payment, and will call them beforehand. For other lenders, however, no notice or grace period is given.

The ignition shut-offs, as inconvenient as they might sound, are a simple consequence of not paying a bill. The starter interrupt devices are put on vehicles, which were sold as part of higher risk loans. Those loans, which are coupled with a GPS starter interruption device, come at a time when subprime auto lending is on the rise. An estimated 25% of all subprime auto loans in the United States include the installation of one of these so-called risk management devices.

Is the absence of a starter interruption device going to be considered a loan perk in the future? Is it now? Have you worked with auto lenders who use starter kill precautions for high-risk loans? Are these GPS devices a good or bad thing for the auto loan industry?