Utilizing a piece of hardware called the starter interrupt device, credit unions and other types of loan companies have started mandating the use of such devices when an auto loan is issued to a customer with bad credit. Detailed by the New York Times this week, the starter interrupt device makes a car completely unusable and is activated after a customer falls behind on car payments. Likely operating over some form of cellular signal, the starter interrupt device can be activated by someone in the loan company’s office through a program on a PC or even through an application on a smartphone.
In addition to halting a car completely, the device includes a GPS function that allows the lender to track the location of the car in case repossession is required. At this time, there are approximately two million vehicles on the road in the United States with a starter interrupt device installed.
In an interview with the head of collections at a credit union, First Castle Federal Credit Union employee Lionel M. Vead Jr. has the ability to view over 800 vehicles within a mapping program at any time. According to Vead, he attempts to reach a borrower behind on payments on the phone or in person. After 30 days of non-responsiveness, Vead will disable the vehicle when it appears to be in a sitting position at the borrower’s home or workplace.
These devices are attached when the lender classifies the customer as subprime, basically someone with a credit score below the FICO rating of 640. These subprime loans come with much higher interest rates than a standard auto loan, something that the banks consider a necessity to balance out the risk of lending the money. Of course, this also makes it difficult for the customer to pay off the loan quickly due to massive interest accumulating each month.
Speaking to regulators about these devices, many borrowers aren’t happy with the level of control that’s exerted by lenders. According to the Times, borrowers claim that their vehicles were disabled when sitting at a stoplight or even when driving down the freeway just a few days after missing a payment. Of course, getting the car towed from that location is just an additional expense that penalizes the borrower even more.
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