Since May 1st 2000, when US President Bill Clinton announced to the public that the US Government would no longer restrict the accuracy of civilian GPS signals there has been a significant increase in a myriad of GPS vehicle tracking systems, both commercial and industrial, that have come to market and made a significant impact on a number of industries.

One of the industries that have been significantly impacted by this evolution of technology has been special finance. The accuracy, reliability and relative low cost of this technology have made it possible to integrate on a number of platforms for the gps vehicle tracking, management and protection of mobile assets. For the sub-prime lender, their mobile portfolio is their lifeblood and an opportunity to gain additional control over this portfolio is invaluable.

The use of a payment delinquency management, such as GPS vehicle tracking systems or some kind of GPS starter interrupt device (SID) has grown in popularity in the special finance industry – especially in the United States. Now, we are seeing a growing number of lenders implementing GPS vehicle tracking sytems in Canada as well. We can learn many things about the proper implementation of such a system when we examine what has happened south of the border over the last few years. If we are studious, we can actually avoid many of the pitfalls experienced by our American counterparts.

When a payment delinquency control program is well managed, late car payment can drastically be reduced. According to the National Independent Automobile Dealers Association (NIADA) the use of any type of SID, including but not limited to GPS vehicle tracking systems, can reduce payment delinquencies by as much as 63.92%, reduce repossessions by approximately 39.77% and can reduce skips by as much as 66% .  The use of a GPS vehicle tracking system enables a lender to offer financing to a broader range of customers. I am not suggesting that GPS vehicle tracking systems can be a substitute for good underwriting but it can certainly augment receivables and reduce liability.  Does this mean that simply by installing a GPS vehicle tracking system that customers will fall over themselves to pay you on time? Obviously not. The key phrase here is: “well-managed”. In this article, I will cover the first step in a well managed payment delinquency control program.

Device Disclosure
An issue still being hotly debated amongst many lenders to this day is to disclose or to not disclose. However, in this author’s opinion, there simply is no debate. Although many major sub-prime lenders will require some sort of disclosure document to be signed by the lessee, most minor ones do not. The majors are implementing what I consider to be the first step in a well-managed program. I speak to small sub-prime lenders every single day of the week. I would say that in my experience about 15% of them are actually telling their customers that they are putting a GPS vehicle tracking system in their vehicle. To these lenders I often ask the following question: If your customer does not know you are putting a GPS tracking system in their vehicle, do you think you are going to improve your delinquency rate or are you just going to be able to repo the car more easily? We are not in the repo business. We are in the car business. The majority of responses I get to this question are framed by fear. Fear that the customer may walk away from the deal, fear that the customer might remove the device and so on. If a customer walks away from a deal because you tell them that you are putting a GPS vehicle tracking system in the vehicle on account of their credit history – you are probably better off. In most cases, that customer most likely had no intention of paying you on time. And while I have encountered some clientele that have disabled or removed GPS vehicle tracking systems in the past – most of those did it after finding out that a device was placed in their car that could track their whereabouts without their knowledge.

If you are like me – you believe the majority of the customers whom you finance are normal people who have fallen on hard times and would like to pay their debts. Give them that chance – but protect yourself at the same time, and let them know you are doing so. This adjusts you higher in their payment priority. A “this bill must be paid” attitude is developed by the customer as soon as they sign their lease agreement. The key here is a re-education of the customer and a re-prioritization of who gets paid first. If you neglect to take advantage of this new ability that GPS vehicle tracking technology has afforded, and you are actually installing devices in your clients’ vehicles without their knowledge you are wasting a large portion of your investment.
Legally, there is very little precedent in the United States or in Canada regarding privacy laws and the installation if GPS vehicle tracking systems. According to Thomas B. Hudson, of the law firm Hudson Cook LLP, most cases that “have been filed, [they] have been settled, or at least have not percolated up to a court that publishes its opinions. ” What does this mean for the lender? It means better safe, than sorry. In any area where there is limited legal precedent it is vitally important to err on the side of caution when implementing a technology that could, in theory, violate a citizen’s right to privacy.

The question then arises: what can a lender do to limit their potential legal exposure while at the same time taking advantage of the numerous benefits that GPS vehicle tracking systems can offer? Foremost, ensure that you practice your due diligence prior, rather than dealing with the first company that you come across. Some vendors have already made an attempt to grapple with potential legal ramifications of GPS vehicle tracking systems and some have not. Make sure that you are dealing with a company that has taken the time to examine these issues and who have prepared disclosure documentation based on how their specific device works (Hudson, 2002). Make sure that you always have your legal counsel examine these documents prior to implementing them at the point of sale. Also, it is a good idea to inform your insurance carrier that you are using such devices and inquire if your existing coverage is sufficient to deal with the risks that may arise from implementation.

GPS vehicle tracking systems provide much more value to a lender than one would simply think. Yes, it is true that should a customer skip out on payment, it makes for a much more cost-effective recovery of the vehicles in question. It is also true that preventing a car from starting is a very effective way of extricating that late payment from a customer. When combined with the more intangible benefit of moving the monthly or weekly car payment to the forefront of the customers’ mind when paying bills, the benefits of incorporating GPS vehicle tracking systems into your business model becomes apparent. As a lender, what are we trying to achieve? Are we endeavouring to sell cars only to spend money to repossess them? Are we trying to sell more cars and collect more money? Whether it is in the payment of collections staff, sending notices, making phone calls, time value of money that should be in your bank account and is not – delinquent accounts cost you money. When your clientele know that you place a very high priority on receiving your payments on time – they will place a high priority on actually paying you on time.