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Miss a Payment? Your Car Stops Running
HughPickens.com writes 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."
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."
I'm glad the finance companies found a way to make "be late on your payment, while you scrounge up money" a worse option for the poor than "let your family starve while you scrounge up money". :-/
There should be a visible counter. "Vehicle payment overdue. Ignition will be disabled in 72 hours 00 minutes..." That would solve most of these problems and make it fair.
"I have never let my schooling interfere with my education." - Mark Twain
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What makes a single male any safer in a dangerous neighborhood?
It would be interesting to see what the net effect of these devices is.
Did it just move a bunch of people from the category of "You can have a car loan and if you don't pay we will go through a long process to repossess your car." to "You can have a car loan but we can shut it off as soon as you miss a payment."
Or did it move people from the category of "You don't get a car loan at all." to "You can have a car loan but we can shut it off as soon as you miss a payment."
I suspect it's both but it would be interesting to know what happens in aggregate.
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This technology isn't new. An Austin car dealer a few years back had something similar where the buyer would pay weekly and punch a code on the receipt on a PINpad or else their car wouldn't start.
IIRC, A disgruntled ex-employee had a valid employee's password, logged on through that, and disabled all cars in the system out of malice, paid customers or not, having all their vehicle horns honk as well until the batteries died.
Not impressed with a system like this. Even after it is removed, the fact that it likely was installed by someone who just hacked and twisted wires at almost random may mean electrical issues down the line.
Yeah poor people, suck it up and call an ambulance. It's only a couple extra grand tacked on to your hospital bill anyway.
Wait, you mean this whole situation BEGAN with financial problems, and this would only compound the issue? Oh, I guess it isn't so easy as "call an ambulance" and "don't be a stereotype."
In the absence of a government-protected monopoly, if all sellers' costs decrease, competition will drive the price down over time. Ideally this is as true of automobile finance as it is of any other good or service. Or to which monopoly are you referring?
It probably is an 8 year old car. The monthly payment is so high because A) the buyer paid a hugely inflated price, B) it's probably got an incredibly high interest rate, and C) it might even have leftover debt from the previous car (that probably also got repossessed*) rolled in.
Remember, places that prey^W specialize on bad-credit buyers are not really car dealers; they're loan sharks that incidentally let you borrow a car. Here's their business model:
(* Is it possible to still owe money on a car after it's been repossessed? I don't know, but it's certainly possible to claim to a bad-credit car buyer that they do.)
"[Regarding the 'cloud,'] ownership was what made America different than Russia." -- Woz
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Debt slavery is perfectly legal in the US as long as you call it 'alimony'.
Jesus was all right but his disciples were thick and ordinary. -John Lennon
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,
the rise of --and lets call it what it is, predatory lending -- in the auto industry is due to a number of factors. Auto purchases from first time buyers, millennials, are down by 30% and a number of millenials by age 18 simply never applied for a drivers license. The bump from cash-for-klunkers, while nice, hasnt been able to produce sustained profit increases for dealers in light of more efficient, less failure prone cars that see service less often. congressional calls for austerity and government shutdowns have reduced consumer confidence after a crushing economic recession. And finally, with american wages at an alltime low and the wealth gap ever expanding, its hard to imagine many dealers can resist the allure of a sales model that results in a more expensive vehicle that nets a longer period of recurring revenue for lending agencies that are basically wings of the automotive brand (Honda Financial Services for example)
The problem is systemic. industry practices like this dont emerge until the dregs have been drained and the market is contracting due to uncontrollable economic greed. outlaw these business practices and reform business related legislation in general to include more acceptance of a post-consumer capitalism that no longer expands inexorably
Good people go to bed earlier.
That would be great, if the credit system worked.
Sadly people have no real defense against people lying about you and dinging your credit. Something that the collection industry is rife with. People just calling up and saying you didn't pay X bill, pay up. And when you say, yes I did pay X bill, here is the proof, they don't care and ding your credit.
The tech bust was very hard on my assets, in fact it wiped them out, and then we had medical issues. That was 13 years ago.
I had a really nice awaking t the amount of abuse and fraud the collection industry has and how they specifically target people between 590 and 640 credit range.
Did you know that when you look into getting are finance mortgage, your credit can take up to a 13 point hit? Just for trying to get a rate, not for actually getting a lone?
That really surprised me. Why? because during the 90's I wrote software for a credit agency. My software was used to determine scores. At that time it was 1 point, soft hit, gone in 8 weeks.
The fact that yo can take any hit to your credit for shopping for a good loan is stupid and, frankly, mean.
The Kruger Dunning explains most post on
>>>People who got NINJA loans were a prime reason for the mortgage crisis.
Not quite. People who gave out NINJA loans to people who had no hope of repaying these loans and then proceeding to misrepresent these loans as AAA were the prime reason for the crisis.
While I'm not saying we should take the word of the lenders without verification, neither should we take the word of the people who are on the receiving end. They may very well not be telling the whole story. Some people who have financial troubles have them because of their own choices, but they rarely admit it.
I had a roommate like that. He was an alcoholic who wouldn't admit it or deal with it. He continually made bad choices in his life, but would never admit anything was his fault. In terms of finance he never paid things when they came due, he didn't pay until he was forced to. It was "due" according to him when they were about to shut off his service, or the like. So he'd get mad about his cellphone getting shut down when he was "a day late" by which he really mean "45 days past the due date, over 30 days late, and had 2 threatening letters to disconnect."
So before you go jumping to the defense of the people in the article, you might want to see what the terms of something like this is. I don't know, and I'm not saying it isn't a "you have to pay by the second it is due or we shut it off," but it also might well be a normal "It is due on day X, late on day X+15, and we shut it off on day X+20," and the people involved have just decided that "X+20" is the day it is "due".
With regards to #2, where in the US if you call 911 do you not get an ambulance? They are not taxpayer funded, but they are required to take ALL calls. If there's a medical emergency, you'll get transport and treatment, even if you lack the means to pay. That is part of the problem with high healthcare costs (the costs of people who don't pay get rolled in to the people who do) and an excellent argument for universal healthcare at least for emergency treatment.
Forced competition between even a handful of carriers - long considered oligopolistic - is driving down cell phone pricing plans considerably.
The USA has some of the highest cell phone costs in the developed world.
Let me rephrase: The cellular market in the United States is not yet at equilibrium. Competition is causing prices to become less "highest" over time and to gradually approach the more efficient price seen in other countries.
Why not just pay cash for the car? I'll generalize and say that if you're paying car loans, you're doing it wrong.
There are edge cases, but pretty much anyone who can afford to qualify for a $250/month car loan can afford to find $500 to buy some junker that will probably last 3 months. After 3 months they'll be ahead $250. Again i'm generalizing, but my point remains.
For most people, most of the time, sucking it up and buying a cheap old car for cash will be cheaper for them than buying a car they can't afford. I define affording a car by "have the cash to pay for it", rather than by the seemingly more common definition of "could get a loan for it".
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