There’s good news (a little) and bad news (a bunch). The good news is that even if you have sub-prime credit (in the world of auto loans, this is apparently a score less than 640), you can now get a new car loan. The bad news is more extensive. Michael Corkery and Jessica Silver-Greenberg of the New York Times recently did an extensive report.
First, interest rates are soaring; appearing in many cases higher than 29%. Second, before the new car buyer can drive it off the lot, they are required to have the ignition fitted with a “starter interrupter device”. Just like it sounds, this enables the lender to disable the car remotely and allows GPS tracking of its location.
This is not a rare occurrence. It is becoming quite common. Fully ¼ of all new auto loans last year were in the sub-prime range, generating about $145 Billion in the first quarter of this year alone. All this money is bringing in the “big boys” from Wall Street equity funds with their securitization schemes that contributed significantly to the crash of the housing market.
People on the receiving ends of these collection tactics have complained to the press and to their political representatives. They are reporting that in some instances their payment is only three days late. There are stories of an ignition being shut off while driving on the freeway creating a safety hazard, of being stranded in dangerous neighborhoods where the driver merely stopped for gas, of being disabled while idling at stoplights, of not being able to get children to emergency doctor/hospital appointments, and abused women being tracked to shelters and safe houses.
Federal and state regulators are searching for a way to regulate this technology. Meanwhile business is good for the devices’ manufacturers and not so good for people who made their living as repo men, searching for cars of people who got behind on their payments.
© David G. Hicks, Attorney at Law
Reference: NY Times Article – Miss a Payment? Good Luck Moving That Car