New Jersey is increasing disclosure requirements for the use of starter interrupters with subprime, used-car auto loans. But a revised state law won’t ban the devices, nor will it lower the maximum interest rate that lenders can charge if those devices are installed on a vehicle.
As previously reported, the sponsors of the original law had argued that the devices could be used to turn off a moving vehicle. Auto dealers and the makers of the devices deny that, saying the devices, when activated, prevent a vehicle from being turned back on after it has been turned off.
Gov. Chris Christie imposed a “conditional” veto on the original version of the law last month, sending it back to the state Legislature with recommended changes.
In response, state lawmakers dropped a proposed penalty on loans where such a device was used. For those loans, the proposal would have lowered the state’s limit on interest rates by 10 percentage points to 20 percent.
The final version of the law is expected to take effect this summer, officials said.
‘A big win’
Dropping the interest rate penalty was “a big win for us,” said Mike Brill, owner of B&B Automotive, a buy-here, pay-here used-car dealership in Burlington, N.J., plus two other locations in Pennsylvania. Brill testified in the New Jersey Legislature against the proposed law.
Under the version of the new law that passed, New Jersey dealerships that install the devices must disclose the existence of the device and the fact that it can disable the vehicle’s starter remotely in the event of a late payment, said the National Independent Automobile Dealers Association, which lobbied against the original version. NIADA said such a disclosure is already common.
Also under the new rules, before the device can be activated, a consumer must be in default for at least five days on a contract requiring weekly payments or 10 days on a contract requiring payments less often. Customers also must be issued a warning at least 72 hours in advance, the association said.
Little new-car impact
Franchised new-car dealers rarely see loans where the devices are used, but some new-car dealers also own buy-here, pay-here dealerships, Brill said.
Jim Appleton, president of the New Jersey Coalition of Automotive Retailers, in Trenton, said he didn’t expect the new law to have much effect on new-car dealers.
Brill said curtailing the use of starter interrupters would make credit less available and raise the cost of credit for customers who do get approved.
“The devices are for one reason and one reason only, and that’s to ensure communication for people who don’t communicate with us” when they miss a payment, Brill said. “It’s a last resort. We call, we text, we email. It’s a small percentage of the people who are not communicating with us.”