WASHINGTON–The Federal Trade Commission is investigating one company over its use of GPS starter interrupter devices, sometimes called kill switches, with certain auto loan borrowers.
The devices allow lenders to track the location of a vehicle and to disable the car’s ignition if a payment is missed.
The FTC is now investigating whether the devices unfairly violate a borrower’s privacy, since they can track every place the borrower goes, according to the New York Times. The devices are primarily associated with subprime loans.
Auto lender Credit Acceptance Corp. revealed in a securities filing that it had received a civil investigative demand from the Federal Trade Commission asking for its “policies, practices and procedures” related to the devices, the Times reported.
“Industry lawyers say the action is part of a broader inquiry by the agency into tracking technologies used in the subprime auto lending market,” according to the New York Times. “If the federal agency determines that the devices are being used unfairly or deceptively, it could force companies to stop the behavior and devise procedures and monitoring to ensure that customer privacy is better protected.”
The Times added that to date there is no widespread evidence that lenders are misusing information they track from a vehicle’s whereabouts.
Manufacturers of the devices told the New York Times that they have clear guidelines in place to protect privacy. “The GPS capabilities, they say, are intended to help lenders locate a car once a borrower goes into default, not to be used simply as a surveillance tool,” the Times reported. “As an added protection, some manufacturers said, they built their devices so that the GPS is not activated until a borrower defaults.”
The story included a link to a previous New York Times story that featured First Castle FCU in Louisiana and its use of the starter interrupter devices. That story can be found here.