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Bill to Require Two Days’ Notice Prior to Disabling of Automobiles Clears Panel

Moriarty, Coughlin amp; Mukherji Bill to Require Two Days’ Notice Prior to Remote Disabling of Automobiles Clears Assembly Panel

(TRENTON) – Legislation Assemblymen Paul Moriarty, Craig Coughlin and Raj Mukherji sponsored to regulate the use of payment assurance devices by automobile dealers and lenders was released Thursday by an Assembly panel.

The bill (A-756) would require automobile dealers and lenders to provide a consumer with at least 48 hours’ notice before remotely disabling a motor vehicle via a payment assurance device. The bill defines a “payment assurance device” as a device, installed pursuant to a consumer’s financing agreement or lease agreement on a motor vehicle with GPS capability or starter interrupt capability, that allows for the remote enabling or disabling of the vehicle.

A recent uptick in auto loans to borrowers with subprime credit scores has led some creditors to use payment assurance devices to ensure that high-risk borrowers lose access to their vehicles should they fail to make a payment on time. An estimated 2 million vehicles are equipped with the devices, but, as detailed in a New York Times article, safety concerns have arisen as borrowers have reportedly had their vehicles disabled during emergencies, while idling or even while driving on the highway.

“These devices are akin to having a predatory debt collector riding in the car with the borrower, ready to strike at the slightest mistake,” said Moriarty (D-Gloucester/Camden). “It’s incredibly unsafe. We need this bill to protect consumers.”

Under the bill, a creditor may install a payment assurance device only if the following criteria are met:

  • The consumer receives written disclosure of the installation and certain notifications upon purchasing or leasing the vehicle;
  • The consumer is not charged a fee for installation of the device;
  • The creditor does not remotely disable the vehicle until the consumer is five or more days in default on any terms under the financing agreement or lease agreement, including but not limited to the periodic payment due on the purchase or lease;
  • The consumer receives a warning at least 48 hours before the vehicle is disabled remotely;
  • The creditor does not remotely disable the vehicle while it is being operated;
  • The consumer has the ability to start a disabled vehicle, and use it for at least 48 hours, in the event of an emergency; and
  • For purposes of a financing agreement, the consumer’s interest rate on the loan is at least 10 percentage points lower than the maximum interest rate permitted by law.

“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,” said Coughlin (D-Middlesex). “This bill would protect consumers who purchase cars that come installed with payment assurance devices by preventing dealers from shutting cars off while they are being operated.”

“A disabled vehicle is more than a simple inconvenience. When a car stops in the middle of a busy road or if there’s no way to get help during an emergency situation, it becomes a serious public safety concern,” said Mukherji (D-Hudson). “Implementing this legislation will ensure that creditors use this technology responsibly.”

Under the bill, a violation of the aforementioned provisions would constitute an unlawful practice under the Consumer Fraud Act, punishable by a monetary penalty of not more than $10,000 for a first offense and not more than $20,000 for any subsequent offense.

The bill was released by the Assembly Consumer Affairs Committee, of which Moriarty is chair.

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