Law in the Internet Society

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GabrielUngerFirstEssay 3 - 01 Feb 2015 - Main.GabrielUnger
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Do Auto Lenders have the Right to Track Borrowers?

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 In a recent New York Times article entitled, Miss a Payment? Good Luck Moving That Car, Michael Corkery and Jessica Silver-Greenberg outline a growing phenomenon whereby auto lenders have been able to compel borrowers to repay their auto loans by tracking and controlling the transmissions of their cars. These relatively new technologies and the innovative ways that lenders are using them to control borrowers pose substantial challenges in the realm of the right to privacy.
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Following the financial crisis in 2008, the poor found themselves in a market that was virtually unwilling to provide them with auto loans. Lenders insisted that they simply could not afford to make loans to subprime borrowers and pointed to the recent financial meltdown for support. However, in the past five years, backed in large part by investors demanding the high interest rates provided by subprime mortgages, subprime loans have skyrocketed. However, to avert a catastrophe reminiscent of 2008, lenders have taken steps to ensure that these loans are repaid promptly.
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Following the financial crisis in 2008, the poor found themselves in a market that was virtually unwilling to provide them with auto loans. Lenders insisted that they could not afford to make loans to subprime borrowers and pointed to the recent financial meltdown for support. However, in the past five years, backed in large part by investors demanding the high interest rates provided by subprime mortgages, subprime loans have skyrocketed. However, to avert a catastrophe reminiscent of 2008, lenders have taken steps to ensure that these loans are repaid promptly.
 

Lender Responses

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Arguments Against the Devices

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On one hand, borrowers are placed in an extremely vulnerable position where they are compelled to agree to near usurious terms (NYT article cites one example where interest rates were as high as 29%) because they require a car for work or family related concerns. Thus, they frequently have little to no bargaining power in negotiations with lenders. They are essentially obligated to give lenders the power to monitor and control their movements at will and at all times from the comfort of their phone. For example, Lionel M. Vead Jr. monitors the movements of roughly 880 subprime borrowers from his phone. He admits to shutting down cars by simply clicking a button while shopping at Walmart. The ability to control a person’s movements from a mere smartphone is a terrifying idea. First, unscreened auto lenders can stalk and trap unsuspecting borrowers. There are currently few laws regulating who can and cannot be responsible for activating the devices. Furthermore, even in the event that those controlling the devices have noble intentions, there may very well be hackers out there with fewer moral constraints who might hack the phones and use the technology to stalk and attack victims. This invasion on the privacy and control is virtually unprecedented and poses a substantial threat to borrowers.
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On one hand, borrowers are placed in a vulnerable position where they frequently have little bargaining power in negotiations with lenders. They are essentially obligated to give lenders the power to monitor and control their movements at will from their phone. For example, Lionel M. Vead Jr. monitors the movements of roughly 880 borrowers from his phone. He admits to shutting down cars by simply clicking a button while shopping. The ability to control a person’s movements from one’s phone is worthy of unique scrutiny for a few reasons. First, unscreened auto lenders can stalk and trap unsuspecting borrowers. There are currently few laws regulating who can and cannot be responsible for activating the devices. While self-help repo-men may be able to repossess cars anyways, they would have to follow the borrower and hope that he or she stops for enough time in the desired place for them to repossess the car. With a starter interrupt device, they can patiently wait until the driver stops the car in a desired place and then instantly shut it down. Then, they can freely come and attack borrowers.

Furthermore, even in the event that those controlling the devices have noble intentions, there may very well be hackers out there with fewer moral constraints who might hack the phones and use the technology to stalk and attack victims. This invasion on the privacy and control is virtually unprecedented and poses a substantial threat to borrowers.

Further, the eventual response to the shift towards automated cars will not necessarily protect subprime borrowers from the starter interruption device. There is a far greater likelihood of the media and the like picking up a failure in an automated car because of the clear risks that the shift to automation poses as well as its very public nature. Both the public will be skeptical and on the lookout for any failures while automakers will be held in the spotlight for many years to come. Neither of these are the case for the starter interrupt device. Therefore, it poses a unique danger worthy of independent consideration.

 

Arguments For the Devices

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However, there are persuasive arguments in favor of the new technologies. First, the concerns of abuse have not been substantiated by fact. Jonathon Welsh, in Late on a Car Loan? Meet the Disabler, in the Wall Street Journal, published an expansive article documenting the new technologies and their potential impacts as early as 2009, yet we have heard little in the way of abuses of these powers. Further, there are already many technologies which track their users such as Waze. The ability for an auto lender to track the movements of borrowers when using their car is by no means a new idea. In fact, millions of people voluntarily distribute their information to obtain better traffic information. The right to privacy in the world of information sharing is currently being heavily debated in light of the recent success of web sharing such as Wikipedia, Facebook, and the like.
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However, there are persuasive arguments in favor of the new technologies. First, the concerns of abuse have not been substantiated by fact. Jonathon Welsh, in Late on a Car Loan? Meet the Disabler, in the Wall Street Journal, published an expansive article documenting the new technologies and their potential impacts as early as 2009, yet we have heard little in the way of abuses of these powers.
 
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There are also substantial benefits in keeping the devices. In light of the recent financial meltdown, lenders simply cannot grant loans to subprime borrowers without some external guarantee of payment. The ability to track and prevent borrowers from absconding with their cars renders the loans safer and thus can potentially increase the availability of auto loans to subprime mortgages as well as reduce interest rates. The technology has yielded undeniable success in terms of obtaining payments from borrowers. The devices have cut the need for ‘repo men,’ as borrowers almost instantaneously make their payments once their cars are stopped, reducing costs for lenders. Furthermore, in the age of information sharing, the ability to track and monitor borrowers provides lenders with more information regarding potential borrowers and characteristics of people who more frequently default on their loans, creating a more efficient market. Greater availability of information may help allocate funds to those who are most likely to repay it. Overall, it is an extremely reliable service which nearly guarantees lenders the return of their loans without the threat of force or prison.
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There are also substantial benefits in keeping the devices. In light of the recent financial meltdown, lenders simply cannot grant loans to subprime borrowers without some guarantee of payment. The ability to track and prevent borrowers from absconding with their cars renders the loans safer and thus can potentially increase the availability of auto loans as well as reduce interest rates. The technology has yielded undeniable success in terms of obtaining payments from borrowers. The devices have cut the need for ‘repo men,’ as borrowers almost instantaneously make their payments once their cars are stopped, reducing costs for lenders.

Furthermore, the ability to track and monitor borrowers provides lenders with more information regarding potential borrowers and characteristics of people who more frequently default on their loans, creating a more efficient market. Greater availability of information may help allocate funds to those who are most likely to repay it. Overall, it is an extremely reliable service which nearly guarantees lenders the return of their loans without the threat of force or prison.

 
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Conclusion

 
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While the starter interrupt device has undeniable benefits, I would argue that the very real danger that lenders or hackers can stalk and isolate a vulnerable borrower outweigh those benefits. Until there is some legal framework to determine who can operate the device and when they can activate it, the risk is too great. In fact, the market has responded accordingly on its own through information sharing. A mere google search for “deactivating starter interrupt device” yielded clear and precise instructions on how to deactivate the device on one’s own. However, there may be plausible justifications for allowing lenders to track borrowers without being able to control access to their cars. The additional information provided could potentially allow for more efficient markets and allocation of funds for auto loans.
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Conclusion

 
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While the starter interrupt device has undeniable benefits, I would argue that the very real danger that lenders or hackers can stalk and isolate a vulnerable borrower outweigh those benefits. Until there is some legal framework to determine who can operate the device and when they can activate it, the risk is too great. In fact, the market has responded accordingly on its own through information sharing. A mere google search for “deactivating starter interrupt device” yielded clear and precise instructions on how to deactivate the device on one’s own.
 

Revision 3r3 - 01 Feb 2015 - 21:02:53 - GabrielUnger
Revision 2r2 - 04 Jan 2015 - 17:47:00 - EbenMoglen
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