FTC Hunting for Abuse in Auto Lenders’ Implementation of Kill Switches
Finance companies have begun using ignition kill switches and tracking devices, which allow them to disable and then easily locate vehiclesÂ for repossession. Some of the devices even remind borrowers when they’ve missed a payment. According to PassTime, a company that sells such devices, somewhere between 35 and 70 percent of cars financed on subprime loans have some variant of the hardware installed.
Now the theÂ Federal Trade Commission is looking into whether these automotive finance companies are illegally harassing consumers with poor credit by imposing the hardware onto their vehicles â€” potentially violating their privacy while also garnering unnecessaryÂ intimidation from banks.Â
Currently under theÂ consumer protection agency’s microscope are the Michigan-based Credit Acceptance Corp., and Arizona’sÂ DriveTime Automotive. Bloomberg reported that the FTC has asked for information from both companies about the devices. DriveTime spokesman Chris Piper claimed his company doesn’t use kill switches but that most financed vehicles have a pre-installed GPS system.
For the FTC, the issue isn’t so much that the devices themselves are being illegally installed but thatÂ debt collectors might threaten using them to prematurely deactivate or repossess a vehicle before they have the legal grounds to do so. It’s a problem that has already arisen without the new devices.Â In 2014, Consumer Portfolio Services settled with the FTC for $5.5 million over allegations that it had beenÂ harassing delinquent customers by calling them and saying they were coming to repossess the vehicle long before those actions could be authorized.
Credit Acceptance has been issued five subpoenas or regulatory demands for information since 2014, including one from the Maryland attorney general requesting specific information overÂ its repossession policies.Â The Department of Justice has also subpoenaed other lenders, including General Motorsâ€™s finance unit and the auto lender Santander Consumer USA.
Most companies haveÂ lowered their lending standards in recent years and and number of loans, andÂ delinquencies, have increasedÂ as a result. According to theÂ Federal Reserve Bank of New York,Â roughlyÂ 6 million people are over three monthsÂ late on their car payments as of last December. That accounts forÂ $1.16 trillion in outstanding payments, a 45 percent increase since the final quarter of 2008.
via The Truth About Cars http://ift.tt/Jh8LjA
February 26, 2017 at 03:53AM