Pelican Auto Finance LLC has changed two collection and repossession policies in the wake of increased attention from the Federal Trade Commission and Consumer Financial Protection Bureau, Joel Kennedy, the lender’s chief performance and compliance officer, told Auto Finance News.
The use of GPS-enabled kill switches that can disable a car remotely, as well as “door knock” inquiries used for communication rather than direct collection, have become “much more restrictive,” Kennedy said.
Pelican’s policy change for kill switches came after it was revealed that the FTC has been inquiring about the technology at three subprime lenders: Westlake Financial Services, Credit Acceptance Corp. and DriveTime Automotive Group Inc., Kennedy said.
“Any time there are compliance issues within subprime in particular, we need to think long and hard about if we want to go to the mat on this, or if we should just stop using the device entirely,” he said. “We’ve updated our policy on the use of [kill switches] and it’s much more restrictive than it was prior.”
Door knocks were also widely accepted by the industry as a way to send out communications to delinquent borrowers and ensure that the communication was received, Kennedy said. But when the CFPB and FTC signaled that it doesn’t favor these techniques, Pelican decided to pull back.
“We’ve really made a policy and took a conservative, compliance-based angle on how we want to execute,” Kennedy said. “Both [kill switches and ‘door knock’ inquiries] are tools that we have the right to use, but we want to make sure we’re very discerning and we have a lot of controls around who can use it when, why, and where.”
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