Dealership Tracking Your Every Move?

Attempting to boost used-car sales, car dealers and finance companies have begun using GPS and starter interrupt devices (a.k.a., kill switches) to eliminate the risk of their customers’ default by allowing them to locate vehicles and prevent them from starting. Dealerships present these devices as a choice, but what meaningful choice do consumers–especially those with bad credit–have as they grow in popularity? According to an article from the New York Times, the technology is used in “about one-quarter of subprime auto loans nationwide, . . .reshaping the dynamics of auto lending by making timely payments as vital to driving a car as gasoline.”

Who Uses This Technology and What For?

Starter interrupt devices were originally introduced as a means of protecting dealerships and finance companies from defaulting customers. According to Charles Pearce, Chief Legal Officer of Credit Acceptance, Credit Acceptance started looking into starter interrupt devices after Hurricanes Katrina and Rita. Displaced consumers “had $2,500 FEMA checks, no car, no place to live, and were looking to buy a car.” However, one of the biggest obstacles to car financing is proof of residence, which can help the finance company locate a vehicle if the buyer fails to make her payments. From the perspective of finance companies, they are doing consumers with bad credit a favor by extending credit to them, while resting comfortably in the knowledge that they can use the starter interrupt device to keep the vehicle stationary while they use the GPS device to locate it for repossession.

As GPS and starter interrupt technology gets cheaper to manufacture and install, it’s no wonder name-brand dealerships are hopping aboard. For example, Infiniti of Elk Grove has allegedly required at least one consumer to sign a disclosure of GPS tracking, which the dealer and prospective finance company “may use . . . in any way its capabilities allow.” These “may include, but are not limited to . . . [t]racking and locating the Vehicle at any time or at all times at Dealer/[Finance Company]’s discretion” or “[k]eeping a record of the movement and/or location of the Vehicle on various dates and times or at all times at Dealer/[Finance Company]’s discretion.”

As is the case with DriveTime, these disclosures often require the consumer to agree, “If I have a right to privacy regarding my location or the location of the Vehicle, I waive this right.” To what extent, neither agreement is clear. As one article notes, “there is great potential for abuse.”

The potential for abuse of starter interrupt devices is likewise apparent. An attorney with Legal Services of Eastern Missouri was quoted by the New York Times as stating, “No middle-class person would ever be hounded for being a day late. . . . But for poor people, there is a debt collector right there in the car with them.” “Lenders retain the ultimate control. Buyers must stay current with their payments or lose access to their vehicle.” Simply by tapping a smartphone while shopping in a Walmart, lenders can–and have–prevented a vehicle from starting

What Are My Rights?

At this time, California law only regulates the use of GPS and starter interrupt devices by buy-here-pay-here (BHPH) dealerships.

BHPH dealers can use GPS technology “to obtain or record the location of the vehicle” only if the buyer is expressly made aware of the existence and the dealer’s use of the technology and the buyer gives his or her written consent. (Civ. Code § 2983.37(a)(1).) The law further limits the use of the technology by BHPH dealers to the following purposes: (A) “to verify and maintain the operational status of the tracking technology, to repossess the vehicle, or to locate the vehicle to service the loan or keep the loan current”; and (B) “for any optional service to the buyer” where (i) the GPS disclosure for optional service is separate from the sale contract, is not a condition to the sale, and is executed after the transaction, and (ii) the buyer is allowed to cancel the optional service at any time and is informed of the ability to do so. (Ibid.)

Meanwhile, BHPH dealerships may use starter interrupt devices only if the following requirements are met:

(1)        the dealer notifies the buyer in writing at the time of the transaction that the vehicle is equipped with technology which the dealer can use to shut down the vehicle remotely;

(2)        the written disclosure (a) informs the buyer that he or she will be given 10 days’ notice before the technology is used and a final warning will be given at least 48 hours before the vehicle is shut down, and (b) discloses the manner and method in which the warning will occur; and

(3)        the written disclosure informs the buyer that, in the event of an emergency, the buyer will be permitted to start the disabled vehicle for at least 24 hours after the vehicle’s disablement.

(Civ. Code § 2983.37(a)(2).)

A violation of any of the above requirements “is a misdemeanor punishable by a fine not exceeding two thousand dollars ($2,000).” (Civ. Code § 2983.37(c).)

In 2017, the Federal Trade Commission began investigating whether the use of GPS technology and starter interrupt devices “unfairly violate a borrower’s’ [sic] privacy.” Ultimately, the FTC must decide “whether the consumer interest of more subprime loan availability outweighs the privacy concerns.” To date, no resolution has been reached.

If you purchased a used vehicle that, unbeknownst to you, was equipped with a GPS device or a starter interrupt device, contact Rosner, Barry & Babbitt, LLP’s Auto Fraud Legal Center for a FREE evaluation of your rights.