The US Federal Trade Commission is investigating an auto lender that often requires subprime borrowers to have so-called GPS starter-interrupter devices enabled on purchased vehicles.
The so-called kill switches, which can monitor a vehicle's constant whereabouts, also have the remote ability to shut a car off and to prevent a car from starting. This makes it easy for lenders to repossess the car for missed payments. But this modern-day version of the repo-man raises both safety and privacy concerns.
The Credit Acceptance Corp. of Michigan said in a Securities and Exchange Commission filing this month that it received a civil investigative demand from the FTC "seeking information on the Company’s policies, practices and procedures in allowing car dealers to use GPS Starter Interrupters on consumer vehicles. We are cooperating with the inquiry and cannot predict the eventual scope, duration or outcome at this time. As a result, we are unable to estimate the reasonably possible loss or range of reasonably possible loss arising from this investigation."
The lender did not immediately respond for comment. There are more than two million of these devices affixed to vehicles on US roads. They are often hidden, and they are required for car buyers with not-so-rosy credit scores as a condition of acquiring a car loan.
The FTC isn't commenting on the probe, which may include other lenders. The investigation likely centers on whether buyers are given adequate notice that the vehicles they are purchasing can track their every move and whether this is an acceptable business practice.
The New York Times recently quoted a Texas man who said he was not told by his auto dealer that the vehicle he purchased had a kill switch installed. Others complained that their ignition was killed while in dangerous neighborhoods, at shopping malls, and even on the freeway.
That said, there is no widespread evidence at this point that the trackers are being used to shut off moving vehicles or to surveil the daily whereabouts of motorists in good standing with their loans. Some of the devices don't activate until a consumer defaults.
The lending industry claims that without the devices, low-income consumers wouldn't be able to purchase vehicles.
Jack Tracey, the executive director of the National Automotive Finance Association, dismissed the privacy concerns.
“This is a registered vehicle,” he said. “It has a license plate, and you can see where it is traveling. You are driving something that isn’t private anywhere.”
The lawfulness of these tracking devices is uncertain. Proposed federal legislation would make it a crime to surreptitiously track an adult's movements using an electronic device. The proposal also says that unless there is a court warrant, companies may not share geolocation information with third parties unless a customer consents.
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