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Payment Assurance Devices and Your Car Loan

Posted on Mar 16, 2017

The New Jersey Senate has just approved a bill that would regulate the way lenders can force you to pay back your car loan.

Gadgets known as “payment assurance devices,” or “starter-interrupt devices,” are installed inside of financed vehicles and are designed to remotely and instantly disable the ignition if the owner falls behind in his or her payments.

Although the devices are mainly installed on vehicles purchased by those with poor or no credit history, many argue that it will give some buyers no other option but to finance cars that can be disabled at any point, risking drivers’ safety and well-being. Critics of this payment incentive also argue that it is a predatory method of debt recovery, making today’s auto lenders nothing more than legally protected loan sharks.

It is currently estimated that there are approximately 2 million of these devices already installed nationwide. The newly approved legislation would closely regulate the terms under which they are utilized. New York, Pennsylvania, Rhode Island and Virginia are also considering similar legislation.

Originally introduced in 2014, the new bill would prohibit the activation of the device while a vehicle is in motion.

"While it's reasonable for a lender to expect a loan to be repaid in a timely fashion, having a vehicle shut off while the driver is on the road is a safety issue both for that particular driver and for other motorists," Washington Township Assemblyman, Craig Coughlin, said in a statement.

The bill also states that a creditor may only install the device if the following criteria are met:

  • The consumer is given a detailed written disclosure about the device installation, to be read and signed by the consumer.
  • There is no charge or fee to the consumer for the installation of the device.
  • The consumer is provided a warning at least 48 hours before the vehicle is scheduled to be disabled.
  • The consumer is able to restart a vehicle for 48 hours after it has been disabled.

The terms have been established based on claims that some drivers with payment assurance devices have had their automobiles disabled during emergencies or while driving.

The bill has not been met without opposition, as some argued against too much regulation on the controversial method of debt recovery.

Proponents of payment assurance devices claim they were created to allow purchasers to build up credit or repair bad credit, while simultaneously protecting lenders. For more information on payment assurance devices, check out this article on Automotive News.

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