Legal Geek No. 24: Electronic Car Repo Man

Welcome back to Legal Geek. This week, we take a look at the rise of subprime auto loans and the legality of electronic devices that lenders are using to ensure timely payments from these high-risk borrowers.

https://archive.org/details/LegalGeekEp24

According to a report this week in the New York Times, subprime auto loans, which are car loans made to those with low credit scores below 640, are accounting for nearly 30% of all auto loans in 2014. This represents the biggest boost for selling cars to people with bad credit since before the market crash of 2008.

But in about a quarter of those loans, the lenders are installing electronic devices called starter interrupters, which disable a car's ignition when the borrower is late to make a payment. This is effectively a new technological form of electronic repossession of the vehicles, and lenders say these devices are critical to negating the risk usually associated with subprime auto loans.

Of course, reports are out there which say the lenders use the devices to track the borrower's movements Big Brother style and that some lenders disable cars at highly inconvenient times, such as when stalled out at a stoplight. But are the lenders breaking consumer laws by extorting payments in this manner?

Some lenders are employing virtual repo men who actually give borrowers a chance by calling them multiple times and waiting 30 days before using the starter interrupter. But others are acting far more quickly, and many times without notice. These types of lenders would likely be breaking some old laws in many states giving rights to borrowers to have a chance to settle debts before the repo man is allowed to come.

Although state laws vary, the terms of auto loan contracts are typically forced to allow for at least 30 days of being behind on payments before the right to repossess is allowed. And any repossession cannot include a breach of the peace, meaning use of physical force or opening a closed garage, for example. It could be argued these devices do breach the peace when used away from a home or workplace setting.

Of course, the device manufacturers and lenders believe this disabling of the vehicle is not actually a repossession. It will be interesting to see how that theory works out if challenged many times in court.

Bottom Line: This is a gray area of law, but states will eventually be forced to define exactly how these new technologies are governed in the auto loan context. One would expect that the largely defenseless struggling consumers will win the day eventually, but for now, the banks hold all the power and wield it heavily, whether actually legal or not.

Thanks for reading. Please provide feedback and legal-themed questions as segment suggestions to me on Twitter @BuckeyeFitzy or in the comments below.

Legal Geek No. 23 - Delaware Data Destruction

Welcome back to Legal Geek. This week, we take a look at the new personal data destruction law put into effect in Delaware and how this may be the most important development in the hot field of privacy law to date.

https://archive.org/details/LegalGeekEp23

A few weeks ago, Delaware's legislators and governor signed into law a new data destruction policy that requires complete destruction of personal identifying information held by companies after it is no longer being used. More specifically, the law states that entities must "destroy…a consumer's personal identifying information within its custody and control that is no longer to be retained by the commercial entity...by shredding, erasing, or otherwise destroying or modifying the personal identifying information in those records to make it entirely unreadable or indecipherable through any means."

This sounds good and it follows the lead of many other states which have put in consumer privacy protection laws, but is it the biggest win for consumer privacy in the war against identity theft? I think it is this important for a number of reasons.

First, the law applies to a wide variety of data sets that would be maintained by companies, as any data set including personal identifying information is included in the destruction obligation. With personal identifying information requiring only a non-encrypted consumer's name in combination with any other personal item such as social security number, credit card number, tax information, or bank account number, this should ensure any possible consumer data will be subject to destruction immediately upon the company's intent to stop using the information. The law also has broad applicability to paper and electronic records, including those stored in the cloud.

Second, the law as written appears to broadly apply to all companies subject to Delaware law, which would include the nearly 50% of companies in the U.S. which have chosen to incorporate in Delaware because of favorable business and tax laws there. The law has no exceptions for size, revenue, or charitable status, so all of these companies would now be subject to these tough privacy laws for protecting consumers.

Third, the law has bite on the enforcement side, allowing for the Attorney General to bring regulatory actions as well as allowing for private lawsuits with increased treble damages possible for individual consumers in court. The law applies clear encouragement for companies to destroy documents and information securely, limiting the chance that careless or negligent actions will lead to mass amounts of identity theft.

Bottom Line: companies are storing more and more consumer private data these days, and the attacks of hackers leading to identity theft are becoming more common. This law in Delaware encourages either encryption of all consumer data or destruction of data in a responsible and prompt manner when not being used, which should limit the leaks and openings most often exploited by identity thieves and hackers. Considering the potential coverage of about half of U.S. companies, this is the best state law consumer advocates could ever hope for and is a huge win in the war against identity theft.

Thanks for reading. Please provide feedback and legal-themed questions as segment suggestions to me on Twitter @BuckeyeFitzy or in the comments below.