http://online.wsj.com/article_print/0,,SB110073452306977368,00.html
The Wall Street Journal, November 18, 2004, Page D4 High-Tech Device Disables a Vehicle's Starter If Driver Misses Payments By MICHELLE HIGGINS Here is a radical way to crack down on people who fall behind on their car payments: take away the keys. That is what a growing number of lenders and car dealerships nationwide are doing in an effort to end the lengthy, expensive cycle of tracking down people who are delinquent and potentially repossessing the car. It is made possible by a new high-tech device -- a small keypad that installs in the dashboard -- that requires drivers to punch in a code provided by their lender before their car will start. If you don't pay on time, your code stops working. Such efforts are primarily aimed at customers who have credit problems. So-called starter-interrupt devices are fast gaining popularity among independent auto dealers who carry their own financing. While many of the lenders serving this market aren't household names, they account for about $80 billion in annual lending. PassTime requires drivers to punch in a code to start the car. One manufacturer of the gadgets, Gordon Howard Associates Inc., says it has sold about 160,000 of its PassTime devices so far to some 1,600 auto dealers. Another manufacturer, Payment Protection Systems Inc., says it has sold more than 130,000 of its On Time touch pads. Lenders say devices such as these tackle one of the biggest problems with auto loans: When someone falls behind on payments, it is difficult to force them to pay up. After all, they already have their hands on the car. Starter-interrupt technology helps lower that risk. Delinquency rates drop to 7% with the device from an average of 29% without the system, according to Leedom & Associates LLC, an automotive-data company. Lenders are using more risk-management tools to pinpoint what type of loan to offer a potential borrower based on that person's individual credit profile. "The gradations are becoming finer between different types of borrowers," says Daniel Ray, editor in chief at Bankrate.com, a financial-information site. Lenders say the gadgets work in the interest of borrowers by enabling consumers who typically wouldn't be able to afford a car to have one. They also say many customers that use the device typically are able to build their credit score back up enough to qualify for traditional financing on their next car. However, some consumer advocates counter that another loan is the last thing people need if they are already in over their head. In addition, the devices "force this particular loan payment to the top of the list," says Jack Gillis of Consumer Federation of America, a nonprofit consumer-advocacy group. As a result, some consumers may put off other important payments, such as a mortgage. Even if consumers with bad credit agree to have a starter-interrupt device installed, they don't necessarily get a break on the interest rate. For instance, Roger Williams Auto, a used-car dealership in Warwick, R.I., charges 18% (though it does cut the size of the down payment to 10% from 30%). By contrast, a typical 48-month new-car loan is currently around 7.74%, according to the latest Bankrate survey of large lenders. Once PassTime is in use, a siren-like noise warns a driver if their payment due date is impending by sounding for 20 seconds when the car is turned on or off. If the payment isn't made on time, the code expires and the car won't start. The On Time keypad also provides warnings. Three days before the payment is due, the keypad launches into a countdown. One day before the payment is due, the number one flashes, and the device begins to beep. None of the devices will stop a car when it is moving. Emergency codes are available in the event that the vehicle has been disabled and the owner needs to drive to the hospital, for instance. --Jane J. Kim contributed to this article. You are a subscribed member of the infowarrior list. Visit www.infowarrior.org for list information or to unsubscribe. This message may be redistributed freely in its entirety. Any and all copyrights appearing in list messages are maintained by their respective owners.
