T. Candice Smith lost control of her car on the Las Vegas freeway when it suddenly shut off. She alleges it happened because the lender of her subprime auto loan activated a starter-interrupt device installed in the car as a condition of the loan. The New York Times reports that the devices, also outfitted with GPS, are used in a quarter of these loans nationwide and allow lenders to remotely disable a car's ignition if payments are late. (Smith's lender says the devices can't shut down a car while it's in operation, and it reached a confidential settlement with her.) "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," says one expert. High-interest subprime loans, intended for people with bad credit scores, have in five years ballooned to 25% of all car loans.
Lenders argue the devices have made their jobs easier when payments are late. They can shut off the borrower's car and, soon after, collect their money. “It gets their attention,” one debt collector tells the Times. The practice has inspired more than a little concern from state regulators: Lenders sometimes wait mere days—rather than the 30 typically required by law before repossessing a vehicle—to activate the devices, whose GPS capabilities may amount to surveillance and data-gathering, privacy experts say. Borrowers also report "electronic repossession" at stoplights or in dangerous neighborhoods—or on the freeway. "These people could do whatever they wanted," Smith says of her lender, "and there was nothing I could do to stop them." Click to read the full Times report. (Read more subprime lender stories.)