Marketplace Scratch Pad

Pay up or your car won’t start

Scott Jagow Mar 25, 2009

Great story in the Wall Street Journal this morning about how used-car dealers are installing remote disabling devices inside vehicles. You get behind on your loan, and you won’t be driving anywhere.

Because credit’s so tight, the Journal says dealerships are expanding their own financing operations. But they can’t afford to be left hanging. So they’re installing small devices under the dashboard that are wired to the ignition.

The CEO of On Time, a company that makes these devices, calls the technology “a behavior-modification method.”

Mr. Lavoie points out that few people neglect to pay their cellphone bills, because they know the phone will stop working if they do. Applying the same principle to cars helps move auto-loan payments higher on the consumer’s list of priorities, he says.

It also helps a broader range of customers qualify for loans, he says. “Typical customers may have no established credit or they may have dings on their credit,” Mr. Lavoie says.

The device won’t activate while the car is in motion. It only makes it impossible to start up again. It sure would stink if you weren’t at home when it activated. But there are other concerns:

John Van Alst, a lawyer with the National Consumer Law Center, calls the practice of remote disabling “electronic repossession” and says it represents a kind of intimidation, as well as creating extra hassles for people who are already financially strapped… He also is worried that the devices could become more a rule than an exception. “It could be the way of the future,” he says. Now that the devices are becoming common in the used-car business, in time they could turn up on new cars as well. “Maybe they’ll put one on my refrigerator,” he says, only half in jest.

Yeah, I suppose the possibilities are endless. The big-screen TV shuts off right before the Super Bowl. Or what if the entire house locks up?

Scary. Then again, there’s something appealing about this idea, coming off a period where lenders threw money at people who clearly didn’t have the capacity to pay it back.

You get wheel-locked for not paying parking tickets. How is this any different?

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