BY BRAD R. BERGMOOSER FREEBORN & PETERS LLP
GPS tracking and starter interrupt devices offer a safeguard for credit unions in terms of collection costs and vehicle repossession. Laws governing electronic repossessions, however, pose some tricky liabilities. These implementation strategies will help your CU tip the balance of these risks in favor of the obvious rewards.
Global positioning system (“GPS”) tracking and starter interrupt devices can help credit unions reduce collection costs. They can also create a simpler process for repossessing vehicles tied to delinquent loans. At the same time, these techsavvy tools can be sources of potential liability, however, and can subject the credit union to costs far exceeding any savings created by their use.
Conducting “electronic repossessions” through GPS tracking or starter interrupt devices implicates member privacy concerns and possible discrimination claims. In addition, such devices create a need to review and amend loan documents. On the other hand, their use could provide credit to certain members who would not otherwise qualify and could reduce the overall cost of credit to the membership as a whole through an efficient repossession process.
Much of a financial institution’s repossession and collection process is governed at the state level, and there is little federal guidance or case law in place. Hence, using electronic repossessions becomes a complex balancing of risk and reward more than picking between right or wrong. Despite the lack of a clear legal roadmap, a credit union can look to existing laws and regulations to come up with several actions to consider adopting if it wants to implement electronic repossessions into its collection practice.
The golden rule for GPS tracking and starter interrupt devices is to use them only if the member agrees to it. Prior notification and consent is already the law in a number of states, and it could help the credit union defend other claims, such as a violation of the CFPB’s Unfair, Deceptive or Abusive Acts or Practices rule.
State and federal law also protects member privacy. The credit union can use the member’s agreement to allow the use of such devices to waive any privacy protections related to the location of the vehicle.