The thermometer showed a 103.5-degree fever, and her 10-year-old’s asthma was flaring up. Mary Bolender, who lives in Las Vegas, needed to get her daughter to an emergency room, but her 2005 Chrysler van would not start.
The cause was not a mechanical problem — it was her lender.
Bolender was three days behind on her monthly car payment. Her lender, C.A.G. Acceptance of Mesa, Ariz., had remotely activated a device in her van’s dashboard that prevented the vehicle from starting. Before she could get back on the road, she had to pay more than $389.
“I felt absolutely helpless,” said Bolender, a single mother who stopped working to care for her daughter. It was not the only time this happened: Her car was shut down that March, once in April and again in June.
The use of devices called “starter interrupt devices” have risen as auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked over the past five years.
The jump in subprime auto loans has been driven in large part by the demand among investors for securities backed by the loans, which offer high returns at a time of low interest rates. Roughly 25 percent of all new auto loans made last year were subprime, and the volume of subprime auto loans reached more than $145 billion in the first three months of this year.
But before they can drive off the lot, many subprime borrowers like Bolender must have their car outfitted with a device that allows lenders to remotely disable the ignition. And, using the GPS technology on such devices, lenders can also track a vehicle’s location and movements.
The devices, which have been installed in about 2 million vehicles, are helping feed the subprime boom by enabling more high-risk borrowers to get loans. But there is a big catch. By simply clicking a mouse or tapping a smartphone, lenders retain the ultimate control. Borrowers must stay current with their payments, or lose access to their vehicle.
“I have disabled a car while I was shopping at Wal-Mart,” said Lionel M. Vead Jr., the head of collections at First Castle Federal Credit Union in Covington, La. Roughly 30 percent of customers with an auto loan at the credit union have starter interrupt devices.
A Spireon spokesman said the company takes privacy seriously and works to ensure that it complies with all state regulations.
Corinne Kirkendall, vice president for compliance and public relations for PassTime, which has sold 1.5 million devices worldwide, says the company also calls lenders “if we see an excessive use” of the tracking device.
Across the country, state and federal authorities are grappling with how to regulate the new technology.
Consumer lawyers, including dozens whose clients’ cars have been shut down, argue that the devices amount to “electronic repossession” and their use should be governed by state laws, which outline how much time borrowers have before their cars can be seized.
State laws governing repossession typically prevent lenders from seizing cars until the borrowers are in default, which often means that they have not made their payments for at least 30 days.
The devices, lawyers for borrowers argue, violate those laws because they may effectively repossess the car only days after a missed payment.