For as long as there are auto loans, there will be people who don’t make payments. It’s as certain to me as death and — that other thing.
This dynamic forces lenders to continually look for ways to ensure that as many of their customers pay as possible. The past decade has seen lenders look to in-vehicle hardware and software — such as GPS devices or starter-interrupt devices — to help them identify and locate delinquent debtors and defaulted collateral.
I was watching a television show the other day and there was a scene where a baby was locked in a car with the keys inside. One of the owners called a fictional version of OnStar or Sync, the on-board computer systems offered by General Motors and Ford, and just before the owner’s partner smashed a window with a garbage can to get to their child, an operator wirelessly unlocked the car doors and saved the day.
I’ve also seen a commercial where a Ford owner uses his Sync to check Facebook to see how a date went.
This got me thinking.
Are GM and Ford using OnStar and Sync to collect on past-due loans? If not, why? The manufacturers are able to tell when these cars are being driven. Why not relay that information to a collector and have the collector try to connect with the debtor? Why not threaten to turn off the car remotely — or maybe lock the doors — until a payment has been made? OnStar and Sync (and whatever other similar systems are currently available) offer tremendous access to car owners. That access creates a huge opportunity. One of the hardest problems faced by lenders is making contact with past-due borrowers. People ignore phone calls if they don’t recognize the name and number on the caller ID (or in some cases, they ignore the calls even when they recognize the name and number). People throw away collection letters without even opening them.
By reaching a car owner while they are driving the vehicle, the lender has a captive audience. There’s nowhere for the driver to go. There are even revenue-generating opportunities if GM and Ford were to offer access to their customers to other creditors. Capital One, for example, could use the system to collect on auto loans and credit cards.
There have been great strides in technology and collections. But many of those strides still rely on debtors agreeing to participate in a conversation with their lenders. The proliferation of on-board computer systems and concierge services could tip the scales in favor of the lenders for the first time in a long time.
Mark — I agree with you in principle, but I think that nobody takes out an auto loan with the expectation of defaulting on it. So I can see a lot of “That’s not cool that they want to do that, but I’m not going to miss any payments so it won’t happen to me,” conversations at the financing table. I also think that its normal for there to be pluses and minuses to these kinds of systems. The plus? An ambulance is dispatched to my location if I’m in an accident. The minus? The lender knows where I am at all times and can use that to their advantage.
Gino – I meant to imply that GM could disable the vehicle or use OnStar to locate it and report the position to a recovery agent.
Of course OnStar already knows my location and can send an ambulance – I opted in for that. I didn’t opt in to give OnStar to right to shut down the car if some collections agent claims I owe them money. And even if I agree to a default clause in the loan contract, unless I have specifically granted OnStar the right to shut down my car based on a third-party claim, I’m suing them if they shut down my car because a third party claims I missed a payment.
The GPS system vendors and lenders who use them can only operate with full disclosure and explicit consent, which is exactly what would be required to do this via OnStar or whatever.
Mike’s original premise was along the lines of, “Why didn’t somebody think of this?” Somebody did. I was actually working for one of the original companies that provided some of the technology when OnStar was launched. Our company provided some of the pieces of the voice recognition. That software could also do voice verification, meaning voiceprints could potentially be used for securing things. Ideas like this one were part of those discussions and the lawyers spoke loud and clear – the risk of liability far outstripped the potential benefits. That’s also the case here. Why would OnStar want to risk its relationship with its customers to help out a few collections agents? It’s all risk and little to no money for OnStar, so it seems an unlikely proposition, except possibly as a direct substitute for the current GPS trackers for the same low-end swath of the credit spectrum, in cars that already had OnStar installed.
Mark — thanks for the insight. The idea seemed too obvious that it hadn’t been considered. Branding is important, but so is a low charge-off rate. I agree with you that no lender wants this kind of class-action lawsuit, either, so consent or transparency is a paramount concern.
But, to me, if I am GM or Ford or any other manufacturer that offers this kind of service, I am looking long and hard at this kind of scenario.
If a borrower is late, why can’t OnStar initiate a contact with a driver, ask if he or she is the owner of the vehicle, and then mention to the driver that someone from GM wants to talk to them and is now a good time? No pressure, no forcefulness. If the driver says no, then that’s the end of the conversation.
You probably know the same rule of thumb that I do — it takes seven attempts, on average, to establish a communication with a delinquent debtor. That’s a lot of time and expense that could be saved using the technology that is already installed in the vehicle.
Thanks for understanding the general premise of the post. To me, these kind of exercises can be very beneficial.
Without disclosing who, I have already had a large lender – client of mine give me the location of the unit using the factory installed GPS system. Seems they only use it for high value vehicles that are near charge off.
We were hit about 8 or 9 years ago. They worked out of Arizona and Las Vegas. The only signs were that they all went through the same salesperson and the deals made too much money. There were no laws in Arizona that applied to this particullar situation at that time. The folks that let the bad guys use their credit ended up with repos. Some had three and four car loans and no idea where the cars were or who had them. We did recover most of the cars, eventually.