Starter Interrupt Devices
By Thomas B. Hudson
I’ve been writing about starter interrupt devices for several years now and currently represent two companies that manufacture the devices. In earlier articles, I examined legal issues arising from their use and suggested ways that dealers and finance companies could use the devices without taking on undue legal risks. Writing these articles and tracking legal developments dealing with the use of the devices has convinced me that the devices are relatively safe, from a legal standpoint, when they are used correctly, preferably with an arbitration agreement as part of the deal package.
Because I have gotten comfortable with the devices, I’m always surprised when I discover that there are those whose opinions I respect who wouldn’t touch the devices with a 10-foot pole. When I ask these detractors the reasons for their positions, they usually respond with one or more of the following, some of which are true and some of which aren’t:
Litigation. Detractors of the devices often mention the threat of litigation. That threat is always real in today’s world, but the fact is that I am aware of only one case involving the use of starter interrupt devices in a creditor-debtor context. That was the case involving Mel Farr’s Detroit dealership. The case was filed in late 1999, and quickly settled, with the judge who approved the settlement agreement saying some nice things from the bench about the good work Mr. Farr’s dealership was doing in financing cars in inner-city Detroit.
These devices have become more and more common since that case. You would think that if the devices are litigation magnets, as I once feared they would be, there would be a lot more legal challenges to their use. It just hasn’t happened.
Privacy. Maybe it is because the federal and state governments are each trying to outdo the other by passing all sorts of privacy laws, but mention starter interrupt devices, particularly those that have a GPS component, and people invariably start muttering about privacy.
Those privacy worries are bogus. Even assuming that a person driving a car on a public highway or on private property has any right to privacy concerning the location of his or her car (and I really doubt that any court would so find), that person may certainly consent to giving up that privacy right by consenting to the use of a tracking device.
We give up our right to privacy every day. Invite a plumber into your home and let him peek under the sink, travel by airline and consent to having your bags searched, visit a doctor and take off your clothes - all are instances in which you consent to something that without your consent would be an invasion of privacy. If the car finance customer consents to the installation and use of a starter interrupt device after a disclosure of how the device works, the privacy issue, in my judgment, goes away.
Regulatory Hostility. There is some truth to this one. Ask a typical state consumer credit regulator about starter interrupt devices, and you will likely get a bad reaction (some of them break out in hives). State officials often automatically assume that anything that is good for creditors is bad for consumers.
Because of this typical attitude, I have recommended for the last several years that the purveyors of these devices and the dealers and finance companies that wish to use them take the initiative in achieving an “attitude adjustment” with these state officials. The kind of attitude adjustment I had in mind wasn’t the type that involved a two-by -four (as tempting as that sometimes is).
Instead, I have recommended that proponents of the devices take the initiative in visiting the state officials, armed with a sample device, technical literature regarding the manufacture and reliability of the device, sample consumer disclosures, a legal memorandum outlining the law, if any, applicable to the devices, and portfolio performance figures showing that customers with previously bad credit are now performing in a manner that will result in improved credit ratings for them. When the officials hear such a presentation, they are often surprisingly receptive.
The Devices Aren’t “Mainstream.” Again, there’s some truth to this one. The devices so far have been used primarily for transactions involving buyers in the lowest credit tiers. While I don’t expect that the devices will migrate to the highest credit tiers (the risk-reward ratio just isn’t high enough when buyers have very good credit), I do look for those buy-here, pay-here dealers and sales finance companies that deal in the middle levels of creditworthiness to begin to stick their toes in the water in a serious way.
The use of the devices by these creditors is likely to begin with customers whose cars have beenrepossessed and who want to cure their defaults. In states in which the cure is not a matter of right, these creditors should be able to condition the customer’s right to cure on the customer’s agreement to the installation of a starter interrupt device. It is likely that such limited use will provide favorable experiences that will lead to broader use by these more mainstream creditors.
Conclusion. Starter interrupt devices and GPS tracking devices are becoming a fixture in the auto credit landscape. The devices still must be used with care and with the advice of a lawyer familiar with the law governing the devices. Full disclosure to the customer is absolutely necessary, as is an arbitration agreement. But in the five years since the Mel Farr suit spotlighted the use of these devices, they have gained traction and increasing acceptance by auto creditors. Look for more and more use of the devices.
Copyright © 2009 CounselorLibrary.com LLC. All rights reserved. Delivery®. Reprinted with express permission from CounselorLibrary.com. *Thomas B. Hudson, Esq. ( firstname.lastname@example.org ) is the Publisher of Spot Delivery®, a monthly legal newsletter for auto dealers, and the Editor in Chief of CARLAW®, a monthly report of legal developments in all states for the auto finance and leasing industry. He is also a partner in the Maryland office of Hudson Cook, LLP. Spot Delivery and CARLAW are produced by CounselorLibrary.com LLC, 7250 Parkway Drive, 5th Floor, Hanover, MD 21076-1343. For information, call 410-865-5411 or visit www.counselorlibrary.com.