Lenders are likely running away from the use of kill switches right now because “you expose yourself to regulatory enforcement,” John Hecht, managing director of equity research and specialty finance at Jefferies LLC, told Auto Finance News.
Westlake Financial Services, Credit Acceptance Corp. and DriveTime Automotive Group Inc. have all been tapped by the Federal Trade Commission for additional information on their use of kill switches, which are able to track and remotely disable a delinquent borrower’s car.
Using GPS to track a car is not the problem, rather the FTC is trying to prevent a situation where the lender shuts down a car while the borrower is in an area they don’t want to be, said Hecht, who covers Credit Acceptance as an analyst for Jefferies.
“Maybe they are 30 miles from home and it’s late at night, or something like that,” he said. “I think they are just trying to rationalize, or prevent something from happening to the consumers, which is what the FTC does.”
Santander Consumer USA hasn’t used the technology in its borrowers vehicles according to Hecht. Instead, the company won’t pursue any use of the technology, chief operating officer Rich Morrin said at a investor event last month. SC’s current repossession policies are equally effective and more compliant, he added.
In the end, Hecht doesn’t believe this will have any effect on lenders in the space.
“This is a newly deployed method and the use of it has obviously been limited, so they will go back to where they were not too long ago,” he said.
