The Debate Over Kill Switches for Dealers and Lenders
You’ve probably heard a lot recently about cars that drive themselves. But what about vehicles that turn themselves off?
A new technology that lets auto finance companies remotely disable borrowers’ vehicles has made headlines in the past few months. The so-called “kill switch,” frequently referred to as a “GPS starter interrupter device,” allows lenders and dealerships to prevent leased vehicles from starting in the event that those vehicles’ drivers fail to make loan payments in time.
Companies that install these devices see them as necessary protection against risky borrowers who may renege on their leasing agreements. For the technology’s proponents, it represents a more effective way of imposing the terms of a contract. Kill switches motivate consumers to keep up with their payments or lose access to their vehicles.
Some drivers, meanwhile, have deemed the technology intrusive, believing that it violates their privacy, and questioning where the scope of the tracker begins and ends—does following a customer’s location at all times constitute spying? Lawmakers and regulators such as the FTC have begun to investigate into these claims, but have yet to issue rules or guidance one way or the other. According to The New York Times:
“If the federal agency determines that the devices are being used unfairly or deceptively, it could force companies to stop the behavior and devise procedures and monitoring to ensure that customer privacy is better protected.
…
In determining whether to take action, the Federal Trade Commission must first decide whether the benefit to consumers — in this case the availability of auto loans — outweighs the privacy problems.”
With consumers’ concerns in mind, let’s take a look at some of the pros and cons of kill switches, from the perspective of a lender or dealer:
Pros
- lower interest rates for subprime borrowers
- greater control over vehicle depreciation
- easier repossession in the event of non-payment
- more information about drivers
Cons
- may foster distrust between consumers and finance companies
- could be ruled out by regulators in the near future
- may be disconnected by borrowers
Yes, some drivers are already taking upon themselves to remove kill switches they’ve found in their vehicles—frequently in violation of their leasing agreements. And while a lender could issue a repossession warning, the situation currently seems to exist in a legal gray area. There’s no telling how a given court would treat the use of the device until the FTC or another agency on the state or federal decides to step in.
What do you think of kill switches and/or GPS starter interrupter devices? Share your thoughts with us on Twitter or LinkedIn, or send us an email. We’d love to hear your point of view and experiences surrounding this emergent debate.
