Federal agency launches investigation into use of GPS tracking by auto lenders

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They can know when you are leaving town and see where you parked your car. They can see how many times you’ve been to the grocery store or to the health clinic.

Auto loans to Americans with poor credit are booming, and many finance companies, credit unions, and auto dealerships are using technology to track the location of borrowers’ vehicles in case they need to repossess them.

Such monitoring, say lenders, allows them to extend loans to more low-income Americans knowing they can easily locate the car. Lenders also install devices that allow them to remotely turn off a car’s ignition after a borrower misses a payment.

Now, federal regulators are investigating whether these devices unfairly violate a borrower’s privacy.

Auto lender Credit Acceptance Corporation said this month in a securities filing that it had received a request for a civil investigation from the Federal Trade Commission asking for its “policies, practices and procedures” related to the so-called devices. GPS start interrupt, which are used to deactivate an ignition.

Industry lawyers say the action is part of a larger investigation by the agency into tracking technologies used in the subprime auto loan market.

A spokesperson for the agency declined to comment on the inquiry request.

“Knowing where people are can reveal a lot about what people do in their lives,” said Lauren Smith, policy advisor at the Future of Privacy Forum, a think tank focused on privacy issues. “Location data is very sensitive.”

If the federal agency determines that the devices are being used unfairly or deceptively, it could force companies to stop the behavior and design procedures and oversight to ensure better protection of customer privacy.

The regulatory review of GPS start interrupt devices comes as cracks begin to appear in the burning auto loan market. The percentage of auto loans past due at least 90 days rose to 3.8% in the fourth quarter, from 3.6% in the third quarter, according to the Federal Reserve Bank of New York.

In deciding to take action, the Federal Trade Commission must first decide whether the benefit to consumers – in this case, the availability of auto loans – outweighs the privacy concerns.

The auto finance industry says the benefits of the devices are obvious. Without them, many low-income Americans could not afford the cars they need to get to work.

So far, there is no widespread evidence that lenders are misusing the information they track from a vehicle’s location.

Jack Tracey, executive director of the National Automotive Finance Association, said privacy concerns were unfounded.

“It’s a registered vehicle,” said Mr. Tracey. “He’s got a license plate and you can see where he’s going. You are driving something that is nowhere private. “

The makers of the devices note that they have clear guidelines in place to protect privacy. GPS capabilities, they say, are meant to help lenders locate a car once a borrower is in default, and not to be used simply as a monitoring tool.

As an added protection, some manufacturers have said that they have built their devices so that the GPS is not activated until the borrower defaults.

But privacy experts and many borrowers who have the devices in their cars say there is great potential for abuse, especially because the devices do not fall under traditional state and federal laws. on loans.

Some find it troubling that technology gives lenders so much control over borrowers – especially poor borrowers, who typically have no choice but to accept the device if they want a loan to buy a car.

“They don’t need to know what we’re doing – when we go out to eat, when we go on vacation,” said Elias Sanchez, a forklift operator in Austin, Texas. “We want our privacy.” His car dealership did not tell him that a GPS tracking device was installed in his 2005 Ford SUV, he said.

A 2014 survey by the New York Times highlighted the tracking technology. In an article on the first page, the collections manager for a Louisiana credit union said he could monitor the whereabouts of a vehicle on his smartphone and once turned off a borrower’s contact while shopping at a Walmart.

A mother from Las Vegas described in the article how she was unable to take her feverish child to hospital because her car was locked for a missed payment. Other borrowers have complained in interviews that they are stranded, stranded in dangerous neighborhoods and cut off from their cars when they need it most. In Nevada, a woman told the legislature that her car was stopped on a freeway.

Some state lawmakers have taken note. The New Jersey legislature is working to revise a bill, opposed this month by Gov. Chris Christie, that would strengthen disclosure requirements and add protections for consumers to devices. Under the bill, consumers would receive written disclosures that a device had been installed in their cars and at least 72 hours’ notice before the ignition was turned off.

The Federal Trade Commission has brought several regulatory actions against companies in recent years for breach of privacy.

In 2013, the agency took action against a group of rental companies and a software company for spying on customers who rented laptops. The agency said the companies had used software to take screenshots of confidential and personal information, record customer keystrokes and take screenshots of people in their homes. Companies were prohibited from secretly collect this data of their customers.

Automobiles, the federal agency said, are part of the burgeoning “Internet of Things” that constantly transmits potentially sensitive data across the Web. The agency had urged automakers among many other industries to come up with new guarantees for personal data.

Protecting privacy is expected to remain a central concern of the Federal Trade Commission, even as several new members are due to be appointed under the Trump administration.

“Privacy issues appear to be garnering bipartisan support,” said Christopher Kukla, executive vice president of the Center for Responsible Lending, a research and advocacy group focused on consumer credit. “We’ll have to see if that’s something they can move forward on.”

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