Handle electronic repo man with care
by: Henry Meier
Let me start this morning’s blog by announcing that I am dedicating it to Derek Jeter and formally throwing my weight behind his beatification at the earliest possible opportunity. However, let me remind Yankee fans that Derek is not dead, life will go on, and yes, the Yankees will win championships without him.
Now for today’s blog. One issue that got a surprising amount of attention recently was highlighted in a New York Times article about the increasing use of GPS-based technology that allows lenders to freeze vehicles in place. According to the Times, with the growth of so-called subprime car lending, lenders have increasingly turned to technology that allows them to stall a vehicle being driven by a delinquent driver. As one financer happily explained that without the technology, “we would be unable to extend loans because of the high risk nature of the loans.”
First, there is nothing in state or federal law that would prohibit the installation of these ignition freeze devices. In fact, right now the field is wide open. I say right now because it is the type of technology that state legislators, in particular, will scrutinize to ensure that it is implemented consistent with a state’s general repossession requirements. Does this mean that anything goes when it comes to using this technology? Absolutely not. In fact, aspects of the way it is already being used make the hair on the back of my lawyer’s neck stand up.
For example, if the paper is correct that lenders are disproportionately using this technology for subprime borrowers, then what we have is an Equal Credit Opportunity Act lawsuit in waiting. Remember that under federal law, you can’t have policies that have either the intention or effect of imposing higher lending standards for applicants based on their race, sex, and other types of protected classifications. If a lawyer can prove that a bank or credit union disproportionately conditions the granting of car loans to African-Americans, for example, on agreeing to the installation of GPS technology, then he has proven a violation of federal lending law. One easy way to avoid this problem is to simply make GPS technology a condition of all your car loans. Here’s some advice for you: if you can’t justify using this technology on all of your members, then don’t ask any of them to agree to have it installed.
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