Late pay­ment? Car can be switched off

The Detroit News - - Comics - BY ELAINE S. POVICH State­

About a decade ago, when Erin Hayes was in her late teens, she bought a used car with a sub­prime loan from one of those “buy here, pay here” car lots close to her home near Raleigh, North Carolina.

One day in 2013, hav­ing for­got­ten to make her pay­ment, she got into her 2006 Kia Op­tima at work and turned the key, but in­stead of start­ing so she could go home, the car made a loud beep­ing noise and wouldn’t go any­where.

The lender, with­out her knowl­edge, had in­stalled a “kill switch” and trig­gered it re­motely af­ter Hayes missed a pay­ment.

“I was very anx­ious,” Hayes said re­cently, re­call­ing be­ing stranded with her first car. “They cut the car off, and I was 20 min­utes from home. I told them I would try to pay them, and they cut it on for an hour. If I didn’t have the pay­ment to them in an hour, they’d cut it off again.”

A cou­ple of years later, the same thing hap­pened with her next car, a 2008 Hyundai.

Rudi­men­tary kill switches have long been sold to the pub­lic as anti-theft de­vices for less than $50 apiece. But many sub­prime auto lenders across the coun­try are us­ing more so­phis­ti­cated ver­sions to en­sure that car buy­ers make their pay­ments.

In re­cent years, though, amid con­sumer hor­ror sto­ries rang­ing from in­con­ve­nience to out­right dan­ger, a few states are re­strict­ing or ban­ning the kill-switch tac­tic as un­fair and po­ten­tially un­safe.

New York is the lat­est, with a law that took ef­fect in Oc­to­ber re­quir­ing lenders to dis­close in writ­ing by cer­ti­fied mail when they in­stall the de­vices on ve­hi­cles. Ne­vada’s and New Jer­sey’s sim­i­lar laws took ef­fect in 2017. Law­mak­ers in at least two other states, Illi­nois and Rhode Is­land, are con­sid­er­ing leg­is­la­tion.

Hayes, now 27, ac­knowl­edges her credit wasn’t very good back then; that’s why she had the

high-in­ter­est loans and the kill switches in the first place. But she says hav­ing a kill switch on her cars led to her be­ing stranded more than once.

At least her cars didn’t stop in the mid­dle of a trip. That’s what hap­pened to T. Candice Smith from Las Ve­gas. Smith in 2013 tes­ti­fied to the Ne­vada leg­is­la­ture that her car’s kill switch ac­ti­vated as she was driving down In­ter­state 15.

“All of a sud­den the steer­ing wheel locked up and the car shut

off,” she tes­ti­fied. “I was barely able to make it to the left shoul­der. I was scared and shak­ing and had no idea what just hap­pened.”

Lenders and switch mak­ers con­tend that the switches are less em­bar­rass­ing than the tra­di­tional “repo man” show­ing up on a car owner’s doorstep to take the car. They ar­gue that the switches make get­ting the car op­er­a­tional again faster and eas­ier than go­ing to an im­pound lot.

“They do serve a pur­pose, and there are ben­e­fits to them,” said Michael R. Guer­rero, con­sumer fi­nance at­tor­ney at Bal­lard Spahr, a Cal­i­for­nia law firm that

spe­cial­izes in ad­vis­ing com­pa­nies on how to com­ply with con­sumer law, in an in­ter­view. “They re­duce re­pos­ses­sion costs, and they per­mit the con­sumer to cure the de­fault and restart the ve­hi­cle when it’s cured. They also give some con­sumers ac­cess to credit who oth­er­wise might not qual­ify.”

Guer­rero tracks the hand­ful of states that have passed laws that rein in the use of kill switches by re­quir­ing dis­clo­sure when the de­vices are placed on the cars and al­low­ing bor­row­ers who are in ar­rears to make a pay­ment that will get the cars to start again. Some states also re­quire an emer­gency override

code that can be sent to a bor­rower if an ur­gent need arises.

Jeff Karg, di­rec­tor of mar­ket­ing and com­mu­ni­ca­tions for PassTime in Colorado, said that the au­to­mo­bile starter in­ter­rupt de­vices — as kill switches are also known — that his com­pany man­u­fac­tures can help con­sumers avoid re­pos­ses­sions by buying time to ne­go­ti­ate a pay­ment plan with the lender.

His com­pany con­forms to state laws, he said.

But only half a dozen states have en­acted reg­u­la­tions on kill switches, in­clud­ing Cal­i­for­nia, Colorado, Con­necti­cut, Ne­vada and New Jer­sey. The laws vary, but all, at the least, re­quire telling

the bor­rower that the de­vices, which also have GPS track­ing, are in­stalled.

The Fed­eral Trade Com­mis­sion is look­ing into whether in­stalling the de­vices on cars vi­o­lates con­sumers’ pri­vacy. The FTC, cit­ing a pol­icy not to com­ment on open cases, would not con­firm the in­quiry when asked about it this month.

The Elec­tronic Pri­vacy In­for­ma­tion Cen­ter, a pri­vacy rights group based in Wash­ing­ton, D.C., also filed a com­plaint last year with the Con­sumer Fi­nan­cial Pro­tec­tion Bureau, ask­ing the agency to look into the de­vices as in­va­sions of pri­vacy.

Richard B. Levine / TNS

Sub­prime auto lenders are us­ing “kill switches” to shut off cars re­motely — po­ten­tially strand­ing driv­ers —to en­sure buy­ers make their pay­ments.

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