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Moriarty, Coughlin & Mukherji Bill to Require Two Days’ Notice Prior to Remote Disabling of Automobiles Heads to Governor

Legislation Assembly Democrats Paul Moriarty, Craig Coughlin and Raj Mukherji sponsored requiring sufficient warning before a consumer’s vehicle is disabled remotely for failure to make a payment is headed to the Governor’s desk after receiving final legislative approval from the Senate on Monday.

“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.”

The bill (A-756), which was approved by the Assembly in April, would require automobile dealers and lenders to provide a consumer with at least 72 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 two 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.

“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.”

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 seven 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 72 hours before the vehicle is disabled remotely through at least two modes of communication, such as by email, mail, telephone, text message, or through the payment assurance device or motor vehicle;
– 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.

“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.