It's the nightmare scenario. Your child is having an asthma attack and you need to rush her to the hospital, but your car won't start. It happened to Mary Bolender, but it wasn't a mechanical issue. Her lender had remotely disabled her car for missing a payment.
Ms. Bolender isn't alone. Nearly 25 percent of all auto loans last year were given to subprime buyers, and in addition to insanely high interest rates, many lending institutions are requiring buyers to have what's known as a "starter interrupt device" installed on their cars.
This allows the bank or credit union to remotely control the starter mechanism, rendering the vehicle useless so it can be repossessed. In most cases, it also includes GPS to track the car's location. And sometimes buyers aren't even aware of it.
The New York Times' Dealbook is publishing a series on the subprime auto loan boom, and this latest installment covers the proliferation of these devices and the havoc they're wreaking on people's lives.
Some borrowers say their cars were disabled when they were only a few days behind on their payments, leaving them stranded in dangerous neighborhoods. Others said their cars were shut down while idling at stoplights. Some described how they could not take their children to school or to doctor's appointments. One woman in Nevada said her car was shut down while she was driving on the freeway.
In addition to Ms. Bolender's experience, the NYT profiled a woman who fled her abusive husband and stayed at a shelter outside of the four-county radius specified in her loan agreement. Once the lender was notified by the GPS system that she was out of the geo-fenced area, a tow truck was sent to the location.
"She was terrified her husband would be able to find out where she was from the tow truck company," a consumer lawyer in Austin told the NYT.
The privacy implications are one thing, but the ease of which lenders – and the companies they contract – can disable a vehicle is startling.
Lionel M. Vead Jr., the head of collections at First Castle Credit Union in Covington, LA, says he doesn't even have to be at his desk, where he monitors over 800 subprime borrowers, to shut down a vehicle. "I have disabled a car while I was shopping at Walmart," says Vead. "It gets their attention."
Vead says that the process normally involves attempting to contact the owner and only after 30 days of missed payments will he shut down the car, normally at the borrower's house or business. But other lenders have disabled vehicles when people are out of town, on vacation, or even based on unusual GPS activity.
Spireon [one of the companies that makes the devices] says it can help lenders identify signs of trouble by analyzing data on a borrower's behavior. Lenders using Spireon's software can create "geo-fences" that alert them if borrowers are no longer traveling to their regular place of employment — a development that could affect a person's ability to repay the loan.
In addition to tracking and disabling vehicles, some of the systems also emit a beep that will become increasingly persistent as the loan payment approaches, making it both annoying and demoralizing.
Failsafes are apparently built-in to some of these systems, with borrowers getting codes that can restart a vehicle for 24 hours if there's an emergency, but some drivers say that they often fail and can't be used more than once. These systems have also given birth to a series of workarounds, with YouTube videos showing how to disable the systems or bypass them temporarily. Even Instructables has a how-to guide.
Consumer lawyers are beginning to take lenders to task for the practices, which, they argue, violate laws that require at least 30 days of non-payments before a vehicle is repossessed. For Ms. Bolender, the mother with the sick daughter, she was never past that point. But her car was shut down four times this year.
One such attorney told the Times he sees the system as unfairly penalizing lower-income people in a way that others are unlikely to experience.
"No middle-class person would ever be hounded for being a day late," said Robert Swearingen, a lawyer with Legal Services of Eastern Missouri, in St. Louis. "But for poor people, there is a debt collector right there in the car with them."