Originally created 06/13/06

Technology keeps car parked if you miss payment



LIMERICK, Pa. - Rashida Redd punched in a six-digit code in her Pontiac Grand Prix and got a new lease on life.

The 34-year-old Pottstown mother of five had to file for personal bankruptcy about a year ago in the face of mounting medical bills from her husband's open-heart surgery. Despite her poor credit history, she was able to lease the 3-year-old car from Williams Pre-Owned of Limerick on the condition that it have a starter-interrupt device.

"At least I was able to save the house," she said.

The device, the size of a cigarette pack and mounted under the dashboard, flashes green if she has made a car payment on time. If she misses her $94 weekly payment, it won't let her car start.

Starter-interrupt devices are becoming a popular way for lenders to ensure they get paid, and consumers seem willing to accept them to get into nicer cars, use a smaller down payment and qualify for a lower interest rate, according to device manufacturers.

Ken Shilson, a managing partner at Shilson Goldberg Cheung & Associates in Houston, an accounting firm that works with auto dealers who make use of the device, said the market for them is growing.

The major manufacturers of the device report double-digit increases in sales so far this year, compared with the same period a year ago. An estimated 1 million are in use today, he said.

Consumers with poor credit often are faced with interest rates of more than 20 percent - nearly triple the rate drivers with good credit can get, Mr. Shilson said. They also have to pay a down payment equal to 10 percent to 20 percent of the car's purchase price, while buyers with good credit can purchase a vehicle with little or no money down.

Ms. Redd's car is equipped with a device made by Payment Protection Systems Inc., of Temecula, Calif. It's one of three manufacturers that dominate the market - the others are PassTime in Littleton, Colo., and Pay Technologies of Cleveland, Ohio.

Jack Gillis, a spokesman for the Consumer Federation of America and author of The Car Book, doesn't like the idea of a third party having control over a driver's vehicle.

"It's a rather draconian measure to take," he said. "What these companies are able to do is sell cars at virtually no risk to themselves, with all the risk to consumers."

Auto Trakk LLC, of Montoursville, Pa., Ms. Redd's lender, said the device lets the company consider serving even the riskiest customers, though.

"It enables us to look at lower credit scores," marketing manager Denny Sullivan said.

WITH DEVICE, PAYMENTS POWER ENGINE

- Starter-interrupt units are connected to the starter and emit a brief series of sounds or flashes of light days before the deadline for a payment.


- If customers make a timely payment, they can get a new code that will let them operate the vehicle. Some devices are remotely controlled.


- Devices typically are mounted under the dash or hidden in places such as a glove box.


- Manufacturers say the device won't kill the engine while the car is being used. Consumers late on payments are allowed emergency starts.


- Associated Press