Financial institutions, banks and creditors are now using payment assurance devices such as starter interrupter devices, which permit creditors to remotely disable vehicles. While logistically easier, this practice can result in legal liability. For a vehicle located in Wisconsin, the use of a starter interrupter device is a non-starter.
A starter interrupter device is an electronic device installed on vehicles to help mitigate the inherent risks associated with subprime lending. These devices work one of several ways. In some instances, the borrower is given a code to enter in a panel mounted inside the vehicle each time he or she makes a payment. In other instances, the creditor has the ability to simply disable the vehicle remotely so that it is immobilized the next time the borrower tries to start the car after he or she is in default.
Many states permit creditors to use starter interrupter devices subject to certain conditions and safeguards. For instance, Colorado, Connecticut and California have enacted legislation mandating certain conditions for the use of the devices (e.g. notice requirements, consent requirements, prohibition of use if there is a foreseeable risk of harm to public health or safety, etc.). Wisconsin, however, is not one of those states. The State of Wisconsin Bureau of Consumer Affairs of the Department of Financial Institutions issued an informal opinion on this matter on January 18, 2012. The opinion states that “disabling a vehicle would be an unfair collection practice and a violation of sections 218.0116(1)(f) and 427.104(a)(h) of the Wisconsin Statutes.” The opinion further states, “[d]isabling a vehicle prior to the time the creditor has the right to physically take possession of the vehicle would be an improper repossession and therefore also a violation of section 425.206 of the Wisconsin statutes.”
The Department of Financial Institutions informal opinion took issue with the fact that the devices leave consumers responsible for vehicles over which they have no control. Preventing the consumer from moving the vehicle can cause problems such as the accrual of parking tickets, the towing of the vehicle, and blockages of driveways and garages. The informal opinion further states that consumers might also be required to maintain property insurance on a vehicle while deprived of actually using the vehicle.
Currently, there is no reported Wisconsin case law directly addressing the legality of starter interrupt devices; however, lawsuits related to their use have been filed within the state. The potential exposure to creditors under the Wisconsin Consumer Act include: (1) the customer’s ability to retain the vehicle without an obligation to pay any amount; (2) the customer’s entitlement to recover any sums paid to the credit pursuant to the transaction; (3) reasonable attorney’s fees; and (4) the possibility of punitive damages. See Wis. Stat. §§ 425.206, 425.301, 425.305, 425.308. Consequently, it is vital that creditors in Wisconsin exercise great caution in their repossession efforts to avoid liability under the Wisconsin Consumer Act.