![]() In September 2014, the Legal Aid Center of Southern Nevada filed a class-action lawsuit against CAG Acceptance, claiming the company had violated state law and its own contracts by activating the devices on borrowers who were not in default. Stories like Smith’s are becoming more common. ![]() “They’re accounting for risk with the interest rates and putting on these devices.” “The reality is that subprime dealers continue to make loans at interest rates that are at the state maximum,” she says. If payment assurance devices really reduced risk for subprime lenders, we should expect to see lower interest rates on those loans, counters Lisa Stifler, an attorney with the Center for Responsible Lending. Subprime auto dealers “are accounting for risk with the interest rates and putting on these devices.” PassTime claims its technology has reduced delinquency rates for its dealers from 27 percent to 5 percent, on average. By keeping borrowers on track, the technology reduces risk for lenders, thereby opening up credit for people who might not otherwise qualify. This is a positive trend, insists Nicole Munro, an attorney for the Telematics Solution Provider Association, an industry trade group. magazine singled out last year as one of America’s fastest-growing companies. Gadgets with some combination of these features can be found in up to 70 percent of cars financed by subprime loans, says Corinne Kirkendall, a vice president for PassTime-which Inc. PassTime and its competitors also offer separate payment reminder devices that beep when a bill is due. “Payment assurance” devices, as they are known throughout the industry, were first marketed in the late 1990s by a company called PassTime, but sales really took off in the 2000s, when GPS technology made it easy for lenders to find and repossess the vehicles. The next time she bought a car, she told me, she paid in cash.Ĭar Trouble: Inside the lucrative, predatory world of subprime auto loans. “These people could do whatever they wanted and there was nothing I could do to stop them.” The lawsuit left her with a dismal credit score of 324. “The entire process made me feel like I had no rights,” Smith told Nevada legislators at a 2013 hearing on the devices. She hired a lawyer and in December reached a settlement with CAG Acceptance, which agreed to refund some of the uncredited payments the car went back to the dealer. (When she did, Smith says, it beeped “incessantly” for three days-warning that her payment was due-before her car was disabled again.) In the meantime, a judge ordered her to reinstall the tracking device. Instead, it filed a court motion to repossess her car. But when Smith called to find out what had happened, the company didn’t explain. Smith had submitted four payments, legal research later determined, that were never cashed or credited to her account. ![]() Three months later, Smith received a letter from CAG Acceptance’s collections department claiming she owed more than $1,700. On one occasion, she was getting an oil change at the dealership that had sold her the car-a mechanic removed the device so she could leave. Yet her starter was disabled four times that year, she says. In 2012, after the restaurant cut back her work hours, Smith-then 29 years old and living paycheck to paycheck-did fall behind a few times, although never by 30 days. The GPS-enabled kill switch would allow CAG Acceptance to disable her starter if her payments were more than 30 days late. The sales contract required Smith, whose credit score was 690-prime by most definitions-to pay $218 every two weeks for four years. Smith had bought her used Chevy Cobalt the previous year, financing the purchase through a subprime auto lender called CAG Acceptance. “These people could do whatever they wanted and there was nothing I could do to stop them.”
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