What ever happened to the Repo Code?

The New York Times recently ran a disturbing article discussing the increasing use of GPS tracking and “ignition interrupt devices” by sub-prime lenders and auto dealers to “encourage” borrowers to make their payments on time.  Essentially, lenders install a device in a car that will track its location all times and allow them to remotely disable the ignition so the engine won’t start.  The lender will only deactivate the device when the balance is paid.  Hijinx ensue.

While this is the first I’ve heard of these devices being used for this purpose, apparently they’ve been around for quite a while.  I can only assume they are being installed on vehicles in Utah.  I decided to do a little research into the legality of these things.  Here’s what I found.

There is no specific law prohibiting the use of tracking or starter interrupt devices on consumer goods.  As the disabling of car in an effort to collect payment sounds an awful lot like repossession, Utah’s Uniform Commercial Code sections related to repossession of collateral used to secure a loan seem most applicable.  Utah Code Annotated §§ 70A-9-601 et. seq.

Upon default, this section allows a secured party to “take possession of the collateral,” or “without removal, may render equipment unusable and dispose of collateral on a debtor’s premises.” §609.  While an automobile is not typically considered equipment, the fact that disabling an excavator or bulldozer is permitted under the statute gives us an indication of how a court may view the disabling of a car for the same purpose.

Regardless of whether use of these devices is considered repossession or rendering unusable, a secured party is entitled to do either, so long as two conditions are met; 1) the borrower is in default; and 2) and the repossession is done without a breach of the peace.

Has there been a default?

I’ve discussed this topic in a previous post.  Utah code doesn’t define default; instead courts will look to the language of the contract or agreement.   Considering the fact that the lenders draft the contracts and credit agreements, you can expect “default” to be defined broadly.   Unlike some states, Utah does not have a statute requiring a lender to give a borrower notice that they are in default and provide them with an opportunity to pay up.  Unless your agreement says otherwise, the lender can declare default and activate the device without warning.  Let’s just hope you don’t find out when you need to go the emergency room.

Does activation of the device breach the peace?

Proponents claim that use of these devices actually reduces the chances of a breach of the peace.  In some respects I have to agree.  In a typical repo case, a couple burly characters show up unannounced intending to drive away in your vehicle.  Trespassing, physical altercations and uncivilized behavior are much more likely to occur in these scenarios than those when your car simply won’t start.  http://www.youtube.com/watch?v=NwGGkTlupSE

But what if you’re experiencing an emergency, you’re car is parked in a dangerous location or the device is activated while driving?   Manufacturers and advocates claim devices can only deactivate a car that is not running, but there are dozens of cases alleging vehicles were disabled while in operation.  There is little doubt that disabling a vehicle while it speeds down the interstate would result in a breach of the peace.  Unfortunately, unless and until such a terrifying event happens in this state, it is likely the activation of an interrupt device will not be considered a breach of the peace.

 What about privacy?

There is something unsettling about a dealer or lender being able to track your every move.  Use of GPS tracking devices by law enforcement has been determined to be a violation of the 4th Amendment. U.S. v. Jones, 132 S.Ct. 945 (2012). Why don’t the same rules apply to lenders?  The simple answer is consent.  Just as with all those mobile apps and facebook check-ins, you consent to be tracked and waive your right to privacy when you sign your name or check the box.  While there may be some arguments related to the unconscionability of such provisions, so long as there is a written agreement clearly stating that a GPS device has been installed and will be used to track the vehicle, an invasion of privacy argument isn’t going anywhere.

The bottom line is that while a few states have taken steps to regulate the use of GPS tracking and ignition interrupt devices, Utah has not.  Instead, whether or not a lender can install and activate a device on your car will depend almost completely on the terms and conditions of the sales contract or credit agreement.  Unfortunately, because these devices are only installed on vehicles financed by subprime, high risk loans, the borrowers tend to make less money, have poor credit and very limited options.  Just ordinary people.  It’s probably safe to say no driver wants one of these devices in their car, but high risk borrowers have no choice but to consent if they need wheels.  Until the state takes action to regulate the use of these devices, this invasive and demeaning practice will only become more common.

If one of these devices is in your car  take your sales contract and financing documents to a consumer defense attorney.  They should be able to help you decide if it has been installed or used improperly.


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