Thursday, September 25, 2014

Subprime Auto Loans: The Bottom Feeders Are Back

Miss A Payment? Good Luck Moving That Car:

Auto loans to borrowers considered subprime, those with credit scores at or below 640, have spiked in the last five years. The jump has been driven in large part by the demand among investors for securities backed by the loans, which offer high returns at a time of low interest rates. Roughly 25 percent of all new auto loans made last year were subprime, and the volume of subprime auto loans reached more than $145 billion in the first three months of this year.

But before they can drive off the lot, many subprime borrowers must have their car outfitted with a so-called starter interrupt device, which allows lenders to remotely disable the ignition. Using the GPS technology on the devices, the lenders can also track the cars’ location and movements.

The devices, which have been installed in about two million vehicles, are helping feed the subprime boom by enabling more high-risk borrowers to get loans. But there is a big catch. By simply clicking a mouse or tapping a smartphone, lenders retain the ultimate control. Borrowers must stay current with their payments, or lose access to their vehicle.
Awesome...it's like Big Brother meets Repo Man. Check this clown out, who the article calls the "GPS Man", a new kind of virtual repo superhero for the 21st Century:
“I have disabled a car while I was shopping at Walmart,” said Lionel M. Vead Jr., the head of collections at First Castle Federal Credit Union in Covington, La. Roughly 30 percent of customers with an auto loan at the credit union have starter interrupt devices.

From his office outside New Orleans, Mr. Vead can monitor the movements of about 880 subprime borrowers on a computerized map that shows the location of their cars with a red marker. Mr. Vead can spot drivers who have fallen behind on their payments and remotely disable their vehicles on his computer or mobile phone.

The devices are reshaping how people like Mr. Vead collect on debts. He can quickly locate the collateral without relying on a repo man to hunt down delinquent borrowers.

Gone are the days when Mr. Vead, a debt collector for nearly 20 years, had to hire someone to scour neighborhoods for cars belonging to delinquent borrowers. Sometimes locating one could take years. Now, within minutes of a car’s ignition being disabled, Mr. Vead said, the borrower calls him offering to pay.

“It gets their attention,” he said.

Mr. Vead, who has a coffee cup that reads “The GPS Man,” has been encouraging other credit unions to use the technology. And the devices — one version was first used to help pet owners keep track of their animals — are catching on with a range of subprime auto lenders, including companies backed by private equity firms and credit unions.

"GPS Man", don't you love it? "GPS Man...he can disable cars in a single key stroke!" (I feel like I'm reading a really bad Marvel Comic that was pulled from the shelves for lack of sales).

Except it's not a cartoon...it's Wall Street providing the capital for these subprime bottom-feeders who then scam low income individuals into taking out loans (up to 29% interest rates) they can't afford.  Sound familiar?
Without the use of such devices, said John Pena, general manager of C.A.G. Acceptance, “we would be unable to extend loans because of the high-risk nature of the loans.”
If you read the article, this is the same company that turned off a woman's car while she was on the interstate in Las Vegas, forcing her to cross three lanes and almost killing her and untold other drivers on the road that day.
Across the country, state and federal authorities are grappling with how to regulate the new technology.

Consumer lawyers, including dozens whose clients’ cars have been shut down, argue that the devices amount to “electronic repossession” and their use should be governed by state laws, which outline how much time borrowers have before their cars can be seized.

State laws governing repossession typically prevent lenders from seizing cars until the borrowers are in default, which often means that they have not made their payments for at least 30 days.

The devices, lawyers for borrowers argue, violate those laws because they may effectively repossess the car only days after a missed payment. Payment records show that Ms. Bolender, the Las Vegas mother with the sick daughter, was not in default in any of the four instances her ignition was disabled this year.
All of this is troubling on a number of levels. The fact that the gps tracking systems allows "debt collectors" and other unqualified people access to these borrower's every move is borderline stalking. And given that the debt collection industry is rife with criminals, thieves and other malcontents (a "Candy Store for Criminals"), you are basically ensuring this technology will be used in other criminal ways.

But as well all know, Wall Street is rife with criminals, thieves and other malcontents as well, so we shouldn't be surprised that the psychopaths on The Street have figured out a way back into the subprime scams of the 00's.  The regulations have been tightened to prevent similar predatory lending in the housing market, but apparently not when it comes to auto loans. Just another way the poor are scammed, ripped off, surveilled and controlled by the power-elite in society.

I need GPS Man to go kill ISIS terrorists or Russian insurgents. I don't need him hounding single mothers with kids and no money, shutting off their vehicles.

Cross Posted To: The Cranky Sociologists 

UPDATE: More on the scum-sucking Title Loan companies in today's (12/26/14) NYT:
They are, roughly speaking, the home equity loans of subprime auto. In these loans, which can last as long as two years or as little as a month, borrowers turn over the title of their cars in exchange for cash — typically a percentage of the cars’ estimated resale values.

“Turn your car title into holiday cash,” TitleMax, a large title lender, declared in a recent television commercial, showing a Christmas stocking overflowing with money.

More than 1.1 million households in the United States used auto title loans in 2013, according to a survey by the Federal Deposit Insurance Corporation — the first time the agency has included the loans in its annual survey.

Customers of TitleMax, for example, typically renewed their loans eight times, a former president of the company disclosed in a 2009 deposition.

And because many lenders make the loan based on an assessment of a used car’s resale value, not on a borrower’s ability to repay that money, many people find that they are struggling to keep up almost as soon as they drive off with the cash.
Typically, the interest rates are a whopping 100%, in some cases going to 300%.
Unable to raise the thousands of dollars he needed to repair his car, Ken Chicosky, a 39-year-old Army veteran, felt desperate. He received a $4,000 loan from Cash America, a lender with a storefront in his Austin, Tex., neighborhood.

The loan, which came with an annual interest rate of 98.3 percent, helped him fix up the 2008 Audi that he relied on for work, but it has sunk his credit score. Mr. Chicosky, who is also attending college, uses some of his financial aid money to pay his title-loan bill.

Mr. Chicosky said he knew the loan was a bad decision when he received the first bill. It detailed how he would have to pay a total of $9,346 — a sum made up of principal, interest and other fees.
As I wrote in this post already, members of the military are some of the most prized targets for these loan sharks and other predators in the subprime auto loan market. And all of it borderline legal.
In Wisconsin, it took the title loan industry only one year to reverse a ban on the loans that had been put in place in 2010. In New Hampshire in 2008, state legislators enacted a law that put a 36 percent ceiling on the rates that title lenders could charge. Four years later, though, lobbyists for the industry won a repeal of the law.

“This is nothing but government-authorized loan sharking,” said Scott A. Surovell, a Virginia lawmaker who has proposed bills that would further rein in title lenders.
What it is, is government-authorized pedophilia. These title loan companies operate exactly like pedophiles: they "groom" their victims with promises of safety and security, then move in for the abuse. 

And like child molesters, these title loan companies rarely commit a one-time offense. By the time they get caught in their illegal activity, the abuse has been going on for years and years and years.

1 comment:

Todd Evans said...

This is an excellent article Todd. I had no idea this was happening. This makes me want to pay off both cars and buy used cars with cash from now on. The loan on my Malibu was from a reputable bank, but then it was sold to a sub-prime lender (Santander). I can't wait until I'm done with it. (I had to delete the first comment due to a typo.)