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from the scorn-the-poor-man-as-a-thief-in-country-and-in-towne dept.
Auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked in the last five years with roughly 25 percent of all new auto loans made last year subprime, a volume of $145 billion in the first three months of this year. Now the NYT reports that before they can drive off the lot, many subprime borrowers must have their car outfitted with a so-called starter interrupt device, which allows lenders to remotely disable the ignition. By simply clicking a mouse or tapping a smartphone, lenders retain the ultimate control. Borrowers must stay current with their payments, or lose access to their vehicle and a leading device maker, PassTime of Littleton, Colo., says its technology has reduced late payments to roughly 7 percent from nearly 29 percent. “The devices are reshaping the dynamics of auto lending by making timely payments as vital to driving a car as gasoline.”
Mary Bolender, who lives in Las Vegas, needed to get her daughter to an emergency room, but her 2005 Chrysler van would not start. Bolender was three days behind on her monthly car payment. Her lender remotely activated a device in her car’s dashboard that prevented her car from starting. Before she could get back on the road, she had to pay more than $389, money she did not have that morning in March. “I felt absolutely helpless,” said Bolender, a single mother who stopped working to care for her daughter. Some borrowers say their cars were disabled when they were only a few days behind on their payments, leaving them stranded in dangerous neighborhoods. Others said their cars were shut down while idling at stoplights. Some described how they could not take their children to school or to doctor’s appointments. One woman in Nevada said her car was shut down while she was driving on the freeway. Attorney Robert Swearingen says there's an old common law principle that a lender can’t “breach the peace” in a repossession. That means they can’t put a person in harm’s way. To Swearingen, that would mean “turning off a car in a bad neighborhood, or for a single female at night.”
(Score: 2) by urza9814 on Friday September 26 2014, @04:31PM
...they don't install these devices if you have good credit. They install these devices when they know before they even give you the loan that you probably won't be able to pay it back.
(Score: 1) by GeminiDomino on Friday September 26 2014, @04:48PM
They install these devices when they know before they even give you the loan that you probably won't be able to pay it back.
If they know you probably won't pay it back, why the hell are they giving it to you in the first place? No wonder things are so fucked up.
"We've been attacked by the intelligent, educated segment of our culture"
(Score: 4, Informative) by urza9814 on Friday September 26 2014, @05:05PM
Well, it's a profitable business for 'em...three possible ways it ends:
1) They charge massive interest rates, so a lot of people go broke and default on the loan after having already paid off more than they borrowed. These guys charge interest rates between 20-30%. So if you take a ten year loan, they might have already turned a profit even if you default with two years left. And then they get to take your stuff too...
2) Government bails them out. Either directly or by getting taxpayer-funded police officers to go do the dirty work for them of taking your possessions, which they then sell and get their money. They don't particularly care if you end up on the street. They can even put you in prison and have you do labor for around $0.10 an hour...or less.
3) You get a loan, pay it off...and then immediately apply for another loan, because you spent all your money paying off the first one. Then they can just sit there collecting interest forever.
(Score: 3, Informative) by sjames on Friday September 26 2014, @05:18PM
They have it all worked out so that between the high interest they charge and the bulk deal they have worked out with the repo man they make more money lending to people who will probably default than they would lending to people with good credit. They WANT you to default. It's called predatory lending for a reason.
(Score: 0) by tftp on Friday September 26 2014, @07:52PM
If they know you probably won't pay it back, why the hell are they giving it to you in the first place?
It allows an honest, hard-working poor person to have a car. If he is good at paying his debt, he will keep the car and build up his credit history.
Why would it be better if every bank refuses to deal with you? It certainly would be cheaper for the bank to do nothing; and they don't earn all that much on poor customers, considering their default rates and the hassle.
With regard to the article, the sudden shutdown is very bad. However the device could give a warning several days in advance, and if you call the lender they could kick the watchdog if you convince them. It's their car, indeed - but they bought it for you, and they should be civil in how they deal with it. Yes, they have property rights on the car - but they don't trump the right for life and safety of your client.
(Score: 2) by sjames on Sunday September 28 2014, @04:07AM
These aren't proper banks making these loans. The banks won't touch a loan like these.
In many cases, these are lenders who specialize in loans that end in repossession. They structure the loan to encourage defaults, particularly towards the end when they already made the principal back and considerable interest. They will make even more when they repossess the car and sell it again through an associated dealer.
Meanwhile, were these loans not available, the dealers would still need to sell the cars. They would find a way to help the buyers afford them.
(Score: 2) by Thexalon on Friday September 26 2014, @08:19PM
Standard predatory loan looks something like this:
1. Loan $X to a sucker^Hconsumer to purchase and asset worth approximately $X.
2. Require that they pay the (exorbitant) interest $Y.
3. The moment that the consumer fails to pay back the loan, repossess / foreclose.
4. Sell the asset, recovering (at least most of) the $X, leaving you with most of $Y in profits.
There are many industries that survive off of this scam. A huge percentage of auto sales, subprime mortgages, payday loan outfits, title loans (most common where payday loans are illegal), and of course your standard everyday loan sharks. It's not new either: A major plot point in The Jungle back in 1906 was the main character's immigrant family losing their entire savings to a predatory loan. It's a simple way of somebody with money to lend extracting money out of poor people without doing any actual work or taking any real risk.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.