Not Your Father’s Payment Assurance Device – A Plea to Regulators
Terrence J. O'Loughlin, J.D., M.B.A.
Not Your Father’s Payment Assurance Device – A Plea to Regulators
Back in the heyday of WordStar, Lotus 123, and other advanced PC programs in the early 1990's, I had the rare privilege of being a receiver for a Buy Here Pay Here store. I was responsible for winding down its operations as a result of a RICO forfeiture case on behalf of the Florida Attorney General's Office. I was responsible for a fleet of over 200 vehicles and was to collect payments, work with the customer base, and convey their titles to them when they completed paying for their vehicles. I had the power of the state of Florida to make these collections as the Florida Highway Patrol would be assisting me in this enterprise in locating errant customers and repossessing vehicles when consumers did not pay for their vehicles. I sent many letters of warning and spoke with many of these people who were in default, kindly warning them that their vehicles would have to be repossessed should they not pay. A good percentage of these people hid their vehicles and dared me to find them. In fact, I learned new colorful words in the verbal exchanges with these consumers. And, I learned a great deal of respect for BHPH dealers and the industry. Skip tracing and collections is an arduous business. None of these vehicles had payment assurance devices (I am characterizing Global Positioning Systems, or GPS, and Starter Interrupt Devices collectively as payment assurance devices). In those days, the technology was not in common use. In 2015, not only are they becoming a commonly used technology (think ON-STAR) they are a highly reliable advanced technology. The days of WordStar and Lotus 123 are faded memories. I wish that those vehicles had had payment assurance devices installed in them when I was a receiver.
Some years later, in the mid-1990's, I represented the Florida Attorney General as an observer/advisor for the Uniform Consumer Leases Act (UCLA) committee, a project of the National Conference on Commissioners on Uniform State Laws. The objective was to draft a uniform consumer lease act, which various states could adopt. The committee was comprised of attorneys and judges, who were the state selected delegates, and other concerned parties. One of the issues presented to the UCLA Committee was whether to include a section prohibiting the use of GPS or Starter Interrupt Devices. It made perfect sense to me at the time that those devices were dangerous and consumer rights were violated by their use. All the state attorneys general were unified in this perspective, in light of the Mel Farr cases, where consumer abuse had been alleged through the usage of these devices. This committee would hear testimony about these issues and a representative of the payment assurance device industry appeared who laid out several compelling arguments as to why these devices are actually helpful to consumer interests. His presentation changed my mind, and I will recount these arguments, and others, shortly.
One of the consumer fraud cases I worked on in the late 1990s dealt with consumers who complained about their vehicle being repossessed late in the evening by two repo men. After investigating the matter I learned that the two repo men were threatened by a mob of angry people with crowbars and clubs, friends and family of the defaulting party. Fortunately, the matter hadn't become violent but the repossession was legal.
In another consumer case, it was alleged that a missing "repo lady" had perpetrated a murder, but that is a tale for another day.
Why My Memories were Recalled
I was recently reminded of my personal experiences in this area when I was made aware of proposed legislation in New Jersey and New York which would ban the use of starter interrupt devices. This well-intentioned legislation is simply wrong.
Payment Assurance Devices are Pro-Consumer – Why Consumer Advocates Should Support Their Use
There are various reasons why consumer advocates should favor the use of payment assurance devices. And there are no substantive reasons for objecting to their use.
Access to Credit
The CFPB and consumer advocates routinely espouse the need for greater access to credit. The central reason advocates should support payment assurance devices is that it increases access to credit for people who may have credit challenges. BHPH Dealers, as creditors, can have far more confidence in extending credit if they know where their valuable assets are. It greatly increases economic efficiency, as the following reasons will further underscore.
Access to Transportation
As a corollary to greater access to credit is the opportunity to purchase vehicles. In America, people need cars to get to work, school, shop, and so forth. For many people, public transportation simply isn't an option. Payment assurance devices increase this access since BHPH dealers will sell more cars and extend more credit because of the security that payment assurance devices provide. More credit challenged consumers may qualify for credit to purchase a vehicle with some consumers qualifying for a better vehicle, as the extent of their credit will be improved.
The Repossession Process is Greatly Improved or Avoided
Dealers have two basic problems in repossessing their vehicles. First of all, they need to locate them. Some consumers do not wish to forsake their vehicles even if they can't pay for them and hide them or place them in a location where dealers can't repossess them. Secondly, the actual repossession process, with the deployment of a wrecker and repo men, can be disruptive and dangerous. These repossessions often take place at night. Dealers can now disable their vehicles on a street or in a common area and repossess them during the day. They don't need to transport them immediately. This may prevent confrontations as repossessions can be done readily during these daylight hours.
Several years ago a study was produced entitled Repo Madness where it was argued that repossessions were extremely dangerous and should be extensively regulated. I would think that the authors of Repo Madness may wish to reconsider their study by considering the efficacy of payment assurance devices.
It is also important to note that some of these consumers return several times to the dealer and pay their late payments on the very same vehicle that was subject to repossession. I recall one BHPH dealer who told me that one of his customers reclaimed the same vehicle five times after paying the arrearages. If the vehicle was merely disabled by the payment assurance devices the consumer might have the opportunity to submit the amount in arrears and get his car back.
In the alternative, payment assurance devices may provide a warning to the consumer to make his payment or the vehicle will be disabled. The consumer may be able to avoid repossession costs, storage costs, and the great inconvenience of retrieving his repossessed car by heeding this notice.
It should further be noted that with a payment assurance device a default by a consumer may not necessarily rise to repossession with its adverse effect on a credit report.
Prevents Consumer Theft
As I can personally attest, some consumers do perpetrate thefts in hiding their purchased cars and may sell these vehicles to chop shops. Payment assurance devices will prevent these thefts.
Reallocation of Vehicles
Since the repossession process is far more efficient, repossessed vehicles can be resold to other needy consumers more expeditiously. Consequently, availability of credit and access to transpiration is further increased.
Assists Consumers in Remembering to Make their Payments
Payment assurance devices have come a long way in terms of technology. Alerting a consumer that he has only a few days to make a payment may help in providing financial discipline. It may seem harsh, but people with poor credit may not always be the most organized in paying their bills.
If consumers have had their vehicles turned off and the vehicle hasn't been moved, and there is an emergency, the consumer can get his vehicle back, temporarily, for that emergency. A code can be provided for the vehicle to be turned back on. Contrast that result with an actual physical repossession. The vehicle would be gone and there wouldn't be this opportunity.
The Vehicle Won't Be Turned Off On the Freeway
This simply doesn't happen. When properly installed, these devices cannot disable a vehicle in operation.
A person driving a vehicle on a common thoroughfare has no privacy right to the location of that vehicle. Moreover, one may readily consent to exchanging privacy rights to gain access to a vehicle equipped with a payment assurance device.
Over the past twenty years there have been remarkably few cases regarding payment assurance devices. It was expected that there would be a torrent of lawsuits. Certainly if these devices created so many problems there would have been more litigation. This proposed New York and New Jersey legislation is a solution attempting to find a problem to solve.
Fairness to Creditors
Would anyone argue in favor of a consumer when he is in total default of his retail installment sale contract and continues to possess someone else's asset? Shouldn't the creditor have the right to quickly reclaim the vehicle?
Payment assurance devices provide fairness to creditors.
The Payment Assurance Technology Association (PATA) Standards
PATA is comprised of the manufacturers of payment assurance devices. They understand the need for high ethical and manufacturing standards. Clear and honest disclosures, non-discriminatory practices, reliable technologies, and so forth, are advanced by the PATA. This organization has anticipated legisitlative concerns and has acted upon them. Its website is: www.patassociation.com.
Consumer advocates and government agencies should support this technology. There is absolutely no compelling reason not to welcome this technology to assist the consuming public to gain greater access to credit and transportation. Moreover, this technology solves problems that have plagued the industry for years.
I would recommend that consumer interest organizations invite PATA representatives to their meetings for presentations of this very pro-consumer technology. Legislators and government agencies should likewise become so enlightened.
As seen on P&A Magazine.