The Federal Trade Commission issued a civil investigative demand to Westlake Financial Services in November, seeking information about the use of kill switches used to remotely track and shut down the vehicles of delinquent borrowers, according to private bond-offering documents obtained by Bloomberg.
Westlake is the third lender the agency has reached out to about kill switches following reports from last month that Credit Acceptance Corp. and DriveTime Automotive Group Inc. were also approached.
The FTC is seeking information on the lenders’ policies and procedures for communicating with consumers about kill switches, how information from these devices is stored, and how the financial institutions manage complaints and disputes regarding the technology. Westlake is cooperating with the requests the document states, according to the publication.
Westlake did not immediately respond to Auto Finance News‘ request for comment.
Lenders have been optimistic following the election that less regulation would come down from the Consumer Financial Protection Bureau, but these latest inquiries from the FTC show that compliance will continue to be a big topic in auto finance, as Shaun Petersen, senior vice president of legal and government affairs for the National Independent Automotive Dealers Association, predicted last year.
“[It would] help everyone not to move their eyes off of compliance too much,” he said during Used Car Week’s Subprime Forum in November. “It was a remarkable election for sure, but compliance will continue in 2017 and it’s not something we can take our eye off of too much.”
Although delinquencies have been on the rise nearly across the board, charge-offs — which are typically a sign of the repossession rate — have stayed relatively flat, according to earnings reports from numerous lenders.
Lenders have lowered loss rates by waiting longer to repossess the vehicle, and because regulation makes the whole process harder, said Amy Martin, senior director and lead U.S. analyst of auto ABS at S&P Global. Lenders were calling delinquent borrowers too early, too many times, too frequently, and reaching out to references to locate the consumer, she added.
“Some of these things they have been doing, they had to scale back or not do anymore, and that has contributed to making it more difficult to find that obligor and the vehicle early in the process,” Martin said during a webcast last month. “Many lenders have told us they have changed various collection practices in response to increased regulatory oversight.”
