We're not the kind to judge people by their credit scores—life happens, after all—but the auto-lending industry isn't so understanding, particularly now that they can monitor a driver's every move and punish late payments by killing the engine.
Until we read a recent report on subprime car loans in the New York Times, we thought lenders already offered the worst financial traps known to mankind, such as double-digit interest rates and up to seven-year terms. Lenders now frequently combine those provisions with GPS tracking devices that can remotely disable a vehicle's ignition at any time. According to the Times, two million people—many of whom wouldn't qualify for a traditional car loan and are desperate to drive—have essentially agreed for their lenders to treat them as caged animals.
The devices in question are wired into the ignition relay and incorporate a GPS antenna snaked along the door pillar that transmits location and usage data via a cellular modem. While the devices vary, they're built to be intrusive and remind drivers that the bank is always watching. They beep intermittently when a payment is near, beep like mad when payment comes due, and then go ape on the driver when it's late. At that point, the lender, sitting behind a computer or watching a smartphone, can trigger the device to cut out the ignition without warning or notice.
For lenders, it's an immediate, hassle-free way to ostensibly reduce risk from wayward borrowers. Subprime and so-called deep subprime buyers, defined by Experian as those with a credit score under 620, made up about one in five car loans through the second quarter of this year. This group has been growing steadily ever since the economy regained strength after the subprime mortgage crisis that helped trigger the 2009 recession; essentially, says the Times, such loans are in high demand by their backers, as they offer high yields in a time of relatively low interest rates. those who back the loans.
Compared to the first two quarters of 2013, lenders increased subprime and deep subprime loans by 5.3 percent and 12.7 percent, greater than buyers in middle credit ranges, according to Experian. While 30-day delinquency rates are flat, Experian states that car repossessions are up 70 percent. The big uptick doesn't seem to faze lenders armed with immobilizing devices, as they no longer need a traditional repo man to recover a car.
It's so easy that one credit-union manager said that he "disabled a car while I was shopping at Walmart," according to the Times. But the practice may not entirely be legal. One woman interviewed said her car shut off while she was driving—which the device makers say isn't possible—and nearly caused an accident. Other people, such as a woman who drove outside the "geofence" set by her lender in order to escape an abusive husband, see their cars disabled without prior notice, even if state laws mandate lenders to collect on debts only when a specific time has passed, typically 30 days. These are only a handful of stories; likely there are many more people who put up with the devices just so they can drive to work.
- Look But Don't Talk: Can You Legally Use Phone Apps While Driving?
- The Taxman Driveth: In the Future, Your Car May Rat You Out to the Tax Collector
- Automotive Spyware: Vehicle Tracking Systems and Data Recorders Tested
Like private license-plate scanning, a sophisticated tracking database that lenders also use to recover vehicles, there doesn't appear to be specific regulation targeting such invasive technology. All we can say is read the fine print before you sign.
from Car and Driver Blog http://ift.tt/nSHy27
Put the internet to work for you.
No comments:
Post a Comment