TRENTON – Legislation sponsored by Senator Nilsa Cruz-Perez establishing new policies that would regulate the use of payment assurance devices by motor vehicle dealers and lenders cleared the Senate Commerce Committee today.
The bill, S-2046, defines a “payment assurance device” as a device installed on a motor vehicle with global positioning system (GPS) capability allowing for the remote enabling or disabling of the motor vehicle, and which is installed pursuant to a consumer’s financing agreement or lease agreement.
“This consumer protection measure is aimed at ensuring that lenders can’t simply shut off vehicles on a whim, in potentially highly dangerous situations,” said Senator Cruz Perez. “While it is certainly the borrower’s responsibility to provide timely repayment of their loan, we must also protect their safety if they fall behind in their payments.”
The bill would authorize a creditor to install, or have installed, payment assurance devices only if certain criteria is met including written disclosure of the installation and certain notifications are provided to the consumer when the vehicle is purchased or leased. Presently, borrowers are not necessarily informed that the device has been installed in their vehicle, and there is no requirement that a borrower be notified prior to the disabling of their vehicle. Other provisions under this bill would require the consumer not be billed or charged a fee for the installation of the device. The consumer would have to be provided a warning no less than 72 hours before the vehicle is disabled remotely, and the warning must be transmitted through at least two modes of communication. Moreover, the creditor, or an agent, could not remotely disable the vehicle while it is being operated.
There have been reports that borrowers have had their vehicles disabled because they were one day late on a payment. Some borrowers have even indicated that their vehicles have been disabled while they were driving.
“A payment assurance device is a powerful and unique tool in the auto loan industry,” said Senator Cruz Perez. “Our obligation is to make sure that this tool is not being abused.”
A violation of the bill’s provisions by a creditor would be an unlawful practice under the Consumer Fraud Act, which would be 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.
S-2046 cleared the committee 4-2 and will now head to the full Senate for further consideration.